Coloplast Capital Market Day 2009
How Healthcare is Paid in the US Coloplast p Capital p Market Day y 2009 Russ Miller, Director of Reimbursement 29 September 2009 How Healthcare is Paid in the US Page 1
Coloplast Capital Market Day 2009
The U.S. Health Insurance Environment and its Applicability to Coloplast Products
Providers Patients Coloplast Corp. Private Payers Employers p y
29 September 2009 How Healthcare is Paid in the US Page 2
Suppliers
Government Payers
Coloplast Capital Market Day 2009
How Healthcare is paid in the U.S. Employers
Insurance Claims
Patient
Providers
Product Sales P s
Reimbursement
Payment
Ins surance Claims
Reimbursement R
Payers
Product Sales
Suppliers 29 September 2009 How Healthcare is Paid in the US Page 3
Payment
Coloplast Corp.
Coloplast Capital Market Day 2009
Agenda • Payers • Providers and Suppliers • Insurance Transactions (Coverage, Coding and
P Payment) t) • Insurance Reimbursement for the Surgical
Urology Patient • Reimbursement for the Ostomy, Wound or
Continence Patient • Reimbursement for Med Tech Innovation
29 September 2009 How Healthcare is Paid in the US Page 4
Coloplast Capital Market Day 2009
Health Insurance by Payer Segment Lives (millions) Medicare Employment-based insurance (Private Payers) Directly purchased/Individual market (Private Payers) Medicaid Military healthcare coverage Uninsured
40.2 174.8 26.8 38.1 11.2 46.6
Total Coverage Arrangements
337.7
2008 US Population: 304,000,000
Source: United States Census Bureau, Current Population Reports, August 2006, Table C-1; Income Poverty and Health Insurance Coverage in the U.S.; 2005, p.60.
29 September 2009 How Healthcare is Paid in the US Page 5
Coloplast Capital Market Day 2009
Payer Mix for Product Categories Medicare
Medicaid
Private Payers
Self Pay
2%
Surgical Urology ▪ Men ▪ Women
68% 40%
30% 60%
Continence Care
63%
37%
Ostomy Care
70%
30%
Wound Care
40%
29 September 2009 How Healthcare is Paid in the US Page 6
25%
25%
10%
Coloplast Capital Market Day 2009
The Medicare Program: For people age 65+ or with certain disabilities.
Types of Medicare Insurance: Part A – Inpatient Hospital Care, Skilled Nursing Facilities, Home Health Care Part B – Physician Services, Outpatient Hospital, Medical Supplies, Ambulatory Surgery Centers Part C – Medicare Advantage Plans (HMOs and PPOs)
Primary Sites-of Service (SOS) for Coloplast Corp. 22% of Medicare beneficiaries. 29 September 2009 How Healthcare is Paid in the US Page 7
Coloplast Capital Market Day 2009
The World of Private Payers Private sector companies p who administer health p plans that utilize governmental or private sector dollars ¾ Approximately 1500 – 1700 private health insurance companies
29 September 2009 How Healthcare is Paid in the US Page 8
Coloplast Capital Market Day 2009
Private Payers in the U.S. Private health insurance companies p operate p as: ¾ Health Insurance Companies (for individuals or groups) ¾Third Party Administrators (for employers or unions) ¾ Government Contractors (for the Medicare program)
29 September 2009 How Healthcare is Paid in the US Page 9
Coloplast Capital Market Day 2009
Medicaid A state state-administered administered insurance program for low-income low income persons: ¾ Who are aged, blind, disabled or low-income families with dependent children ¾ Who receive public assistance ¾ Other low income disabled groups with high medical expenses.
Eligibility is determined by federal and state law. Medicaid programs are jointly funded by federal & state government government.
29 September 2009 How Healthcare is Paid in the US Page 10
Coloplast Capital Market Day 2009
Agenda • Payers • Providers and Suppliers • Insurance Transactions (Coverage, Coding and
P Payment) t) • Insurance Reimbursement for the Surgical
Urology Patient • Reimbursement for the Ostomy, Wound or
Continence Patient • Reimbursement for Med Tech Innovation
29 September 2009 How Healthcare is Paid in the US Page 11
Coloplast Capital Market Day 2009
Product Categories by Provider/Supplier Type SU
Parrt A
Hospital Inpatient
CC
OC
WC
SC
g Facilities Skilled Nursing Home Health Agencies Physician Practices p Outpatient p / Clinic Hospital Ambulatory Surgery Centers Medical Supplies (home use) - Primary 29 September 2009 How Healthcare is Paid in the US Page 12
N/A - Secondary
Coloplast Capital Market Day 2009
Providers and Suppliers Integrated Delivery Network
Hospital
Local Dealers
GPO
National Distributors
A healthcare system of multidisciplinary providers owned or affiliated under common management. May include several hospitals, physician groups, rehabilitation centers, home health agencies, long-term care facilities and providers of Durable Medical Equipment and Supplies. There are approximately 300 IDNs in the US. Examples include: UCLA, Baylor and Mayo System. An acute care facility that may or may not be part of an Integrated Delivery Network.
Regional and local providers of medical equipment and supplies to local healthcare facilities and patients. There are approximately 64,000 dealers in the US.
For profit F fit companies, i usually ll corporations, ti th thatt engage iin contract t t negotiations ti ti on behalf b h lf off th their i member IDNs. The GPO retains an “admin fee” paid by the supplier, in exchange for the GPOs services. There are 6 national GPOs. Examples include MedAssets, Premier and Novation. Distribute Distrib te large volumes ol mes of prod products cts to m multiple ltiple healthcare entities entities, incl including ding hospitals hospitals, D Durable rable Medical Equipment companies, and home healthcare organizations. Examples include: McKesson, Cardinal Health, Invacare Supply Group, Owens & Minor, Gulf South.
29 September 2009 How Healthcare is Paid in the US Page 13
Coloplast Capital Market Day 2009
Agenda • Payers • Providers and Suppliers • Insurance Transactions (Coverage, Coding
and d Payment) P t) • Insurance Reimbursement for the Surgical
Urology Patient • Reimbursement for the Ostomy, Wound or
Continence Patient • Reimbursement for Med Tech Innovation
29 September 2009 How Healthcare is Paid in the US Page 14
15
Coloplast Capital Market Day 2009
The Building Blocks of Reimbursement • Coverage: Defines the clinical conditions of a service or technology. • Coding: The nomenclature used to classify medical services, supplies and
g categories. g Required q for filing g insurance claims with p payers. y diagnostic
• Payment: Payments are made via defined payment systems and contracts.
Payment assignment is driven by the coding on the insurance claim.
• Compliance: Providers, suppliers and manufacturers are subject to
government oversight and audits. Applicable statutes include: False Claims Act, Anti-Kickback statutes FDA prohibitions on off-label promotion.
29 September 2009 How Healthcare is Paid in the US Page 15
Coloplast Capital Market Day 2009
The Building Blocks of Reimbursement M di Medicare Coverage Policies
Pi Private Payers P
National / Local
Coding Systems
Made by each entity Universal
Payment Systems S
Defined f system for f each site-of-service
29 September 2009 How Healthcare is Paid in the US Page 16
16
Often adopt Medicare Of site-of-service structure / pay rates sett by b contracts t t
Coloplast Capital Market Day 2009
Coding – The Language of Reimbursement CPT ® Coding (Current Procedural Terminology) – used for reporting procedures and services performed by physicians. HCPCS Coding (Level II) – identification of devices, drugs, and supplies. ICD-9-CM Procedure Coding – identification of inpatient hospital services. ICD 9 CM Di ICD-9-CM Diagnostic ti C Coding di – identification id tifi ti off the th reason for f the th encounter. t
® CPT is a registered trademark of the American Medical Association.
29 September 2009 How Healthcare is Paid in the US Page 17
Coloplast Capital Market Day 2009
Coding drives Payment
XX = payment ‘driver’ driver
x = required, required but not a payment driver
C di Coding Site-ofService
CPT
ICD-9 **
HCPCS
Diagnosis
Medical Supplies
X **
ICD-9 Procedure
XX
Critical for meeting payer coverage requirements
29 September 2009 How Healthcare is Paid in the US Page 18
Payment Fee Schedule
Coloplast Capital Market Day 2009
C di d Coding drives i P Paymentt
XX = payment ‘driver’
x = required, but not a payment driver Coding
Site-ofService
CPT
Hospital H it l Outpatient
XX
Amb Surg S Center
HCPCS
Diagnosis
Hospital Inpatient Physician Practice
ICD-9 **
X
Medical Supplies
XX
MS-DRG (PPS)
X
X
Fee Schedule
X
X
Fee Schedule
X
XX
Fee S h d l Schedule
** Critical for meeting payer coverage requirements. PPS – Prospective Payment System. 29 September 2009 How Healthcare is Paid in the US Page 19
Payment APC Group (PPS)
X
XX XX XX
ICD-9 Procedure
Coloplast Capital Market Day 2009
Agenda • Payers • Providers and Suppliers • Insurance Transactions (Coverage, Coding and
P Payment) t) • Insurance Reimbursement for the Surgical
Urology Patient • Reimbursement for the Ostomy, Wound or
Continence Patient • Reimbursement for Med Tech Innovation
29 September 2009 How Healthcare is Paid in the US Page 20
Coloplast Capital Market Day 2009
Medicare Prospective Payment Systems ¾ Hospital Inpatient and Outpatient Example: Virtue Male Sling System
Inpatient (choose 1)
• • • • •
MS-DRG 662
$15,690
MS-DRG 663
$7,752
MS-DRG 664
$5,762
> 24 hour stay (patient in bed). Based on diagnosis and procedure. Subdivided by Severity Severity. Data-driven Payment (Claims data). Geographic adjustment. 29 September 2009 How Healthcare is Paid in the US Page 21
Outpatient APC 385
$6 447 $6,447
Benchmark
• < 24 hour stay (observation room). • Based on procedures only. • Data-driven Data driven Payment (Claims data) data). • Geographic adjustment.
Coloplast Capital Market Day 2009
Private Payer y Reimbursement is critical for Hospital p Profitability 140%
Community Hospital Payment-to-Cost Ratios by Source, 1980-2006
132% in 2007
130% 120% 110% 100% 90% Private Payers Medicare
80%
Medicaid 70% 1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
Source: American Hospital Association.
29 September 2009 How Healthcare is Paid in the US Page 22
Coloplast Capital Market Day 2009
Medicare Fee Schedules ¾ Physician y and Ambulatoryy Surgery g y Center Example: Virtue Male Sling System Physician Fee CPT 53440
$905
• Formula-driven Payment
Ambulatory Surgery Center CPT 53440
$4,811
• Factored from the Hospital
Outpatient Payment • Relative Value Units (RVUs) g p adjustments j • Sustainable Growth Rate (SGR) • Geographic • Geographic adjustments
Private Payers ≈ Medicare + 25% 29 September 2009 How Healthcare is Paid in the US Page 23
Coloplast Capital Market Day 2009
Agenda • Payers • Providers and Suppliers • Insurance Transactions (Coverage, Coding and
P Payment) t) • Insurance Reimbursement for the Surgical
Urology Patient • Reimbursement for the Ostomy, Wound or
Continence Patient • Reimbursement for Med Tech Innovation
29 September 2009 How Healthcare is Paid in the US Page 24
Coloplast Capital Market Day 2009
Insurance Reimbursement Two Important p Variables ¾ A Reimbursement Rate that allows for Supplier Margin ¾ A Utilization Rate that reflects Accepted Clinical Practice Defined by Coverage Policies
Product
Rate
One-Piece Ostomy Pouch (drainable, with filter) Intermittent Urinary Catheter Foam Dressing, < 4” x 4”
29 September 2009 How Healthcare is Paid in the US Page 25
Medicare Utilization
$4 99 $4.99
Max 20 / month Max.
$1.62 - $1.90
Max. 200 / month
$7.85
3 changes / week
Coloplast Capital Market Day 2009
Agenda • Payers • Providers and Suppliers • Insurance Transactions (Coverage, Coding and
P Payment) t) • Insurance Reimbursement for the Surgical
Urology Patient • Reimbursement for the Ostomy, Wound or
Continence Patient • Reimbursement for Med Tech Innovation
29 September 2009 How Healthcare is Paid in the US Page 26
Coloplast Capital Market Day 2009
re'im·burse'ment n. – a.)) repayment p y for expenses p incurred,, b.) payments given to healthcare providers for services rendered or supplies provided, base on benefits covered under an insurance plan.
…but more importantly…
It’s a critical factor for: ¾Determining the speed of market acceptance for new technology, ¾Providing the appropriate margin for product pricing. ¾Creating the space for volume growth of existing technologies.
29 September 2009 How Healthcare is Paid in the US Page 27
Coloplast Capital Market Day 2009
From a Foundation of Clinical Effectiveness Patient Access and Utilization
Coverage Coding Payment P t
Customer Acceptance
Evolving in Importance Clinical Effectiveness
29 September 2009 How Healthcare is Paid in the US Page 28
Health Economic Outcomes
Coloplast Capital Market Day 2009
How Medicare determines coverage
““No payment may be made under [Medicare] ffor any expenses incurred for f items or services [that] are not reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member.” Section 1862(a)(1)(A) of the SSA* SSA ¾ The absence of formal criteria gives CMS discretion and results in a “quasi-
case law” approach to establishing coverage policies. ¾ Generally, a technology is considered “reasonable and necessary” when it: 1. Produces a demonstrable clinical benefit for the Medicare population, and 2 Is supported by methodologically sound evidence 2. evidence.
29 September 2009 How Healthcare is Paid in the US Page 29
Coloplast Capital Market Day 2009
How Private Payers determine coverage ¾ Few payers have published clinical criteria criteria. Technology Evaluation Center Criteria
1.
The technology must have final approval from the appropriate governmental regulatory bodies
2.
The scientific evidence must p permit conclusions concerning g the effect of the technology on health outcomes
3.
The technology must improve the net health outcome
4.
The technology must be as beneficial as any established alternatives
5.
The improvement must be attainable outside the investigational settings 29 September 2009 How Healthcare is Paid in the US Page 30
Coloplast Capital Market Day 2009
New Coding requires Clinical Evidence Requirements AMA Website – Requirement q for New CPT Coding: g ¾ “…the clinical evidence of the service/procedure is well-established and documented in U.S. peer-reviewed literature.” CMS Requirements - HCPCS Request Process: ¾ Requires evidence for claims of “significant therapeutic distinction.” ¾ CMS Denial Letters often state – “Clinical information…does not demonstrate superior clinical outcomes.”
29 September 2009 How Healthcare is Paid in the US Page 31
Coloplast Capital Market Day 2009
Successful Execution of Concurrent Pathways
C Clearanc ce
Execute Payer Coverage Tactics
12 mos.
24 mos.
Secure Coding Secure Payment Class
29 September 2009 How Healthcare is Paid in the US Page 32
36 mos.
Coloplast Capital Market Day 2009
Reimbursement / Health Economic Assessment Model Integrate A Analyze A. A l th Pathway the P th &E Environment i t
in AIM Process
F Monitor & Revise F. B1. Analyze Competing Therapies
Execution D. Strategic g Plan
C. Gap Analysis 29 September 2009 How Healthcare is Paid in the US Page 33
B2. Determine “Fit” of the Proposed Therapy
Coloplast Capital Market Day 2009
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29 September 2009 How Healthcare is Paid in the US Page 34
