By Diane Millman and Rebecca Burke

On  August 30, CMS proposed a new regulation that would provide four years of Medicare coverage for devices that obtain “breakthrough” status from the Food and Drug Administration (FDA) and that would codify current criteria (with modifications) for defining items and services that will be considered “reasonable and necessary” for Medicare coverage purposes. The proposed regulation would also provide for waiver of certain coverage requirements for items and services that are covered by commercial payers, although this aspect of the proposed rule is yet to be fleshed out.  CMS is accepting comments on the proposal through November 2, 2020.

New Regulatory Definition of “Reasonable and Necessary”

Under the Proposed Regulation, CMS is proposing that an item or service would be considered “reasonable and necessary” if it is safe and effective, not experimental or investigational and EITHER

[A]ppropriate for Medicare patients, including the duration and frequency that is considered appropriate for the item or service, in terms of whether it is–

      • Furnished in accordance with accepted standards of medical practice for the diagnosis or treatment of the patient’s condition or to improve the function of a malformed body member;
      • Furnished in a setting appropriate to the patient’s medical needs and condition;
      • Ordered and furnished by qualified personnel;
      • One that meets, but does not exceed, the patient’s medical need; and
      • At least as beneficial as an existing and available medically appropriate alternative;

OR

      • Is covered by commercial insurers, unless evidence supports that differences between Medicare beneficiaries and commercially insured individuals are clinically relevant.

The need for criteria defining what is meant by “reasonable and necessary” has been clear for some time.  Prior efforts to clarify the definition of this critical term have faltered over controversy about whether t cost effectiveness should –-or could legally–be considered in making coverage determinations.   The Proposed Regulation appears to preclude cost or cost effectiveness from being considered (or at least from being considered formally) in coverage decisions, although it would not be surprising if cost considerations were to find their way through a back door, in conjunction with one of the other criteria.

Codification of existing criteria for determining whether an item or service is covered has the potential to improve the local coverage determination process by essentially requiring all Medicare Administrative Contractors (MACs)  and CMS to comport with  a common legally enforceable analytical framework; however, the Proposed Regulations, if adopted without change,, will leave substantial discretion in the hands of local Medicare Administrator Contractors (MACs).  For example, many new technologies are denied coverage on the basis that they are not “safe and effective” or that they are “investigational or experimental”, and the Proposed Regulation would neither remove these roadblocks nor clarify the standards that must be met to avoid them.  At the very least, it would be useful for CMS to include as a “safe harbor” a provision that deems those technologies that are approved for specified indications to be “safe and effective” for those indications, and a provision that deems a technology “non-investigational if it is approved for clinical application by a national professional society or subject to specialty guidelines. Moreover, the proposed criteria to be used to determine whether an item or service is “appropriate” appear to provide regulatory authority for coverage to be limited to specific settings, and for the establishment of frequency and dosage limits that fail to meet the clinical needs of particular patients.

CMS should be applauded for adding to the current definition of “reasonable and necessary” a proposal intended to make Medicare beneficiaries eligible for coverage of technologies that are covered by commercial payers, since it is not uncommon for Medicare beneficiaries to be denied access to items and services that are available to non-Medicare patients.  However, as a practical matter, the utility of this provision in ensuring Medicare patients’ access to new technologies  will depend upon how CMS resolves a number of critical issues, including, for example, whether determinations about the availability of commercial coverage are to be made by MACs on a local basis or by CMS on a centralized basis; whether the proponent of a new technology will be required to demonstrate commercial coverage by one commercial payer, a majority of commercial  payers, or a plurality; and whether the process for demonstrating commercial payer coverage is clear, practicable and expeditious. All of these issues are subject to public comment.

In addition, commercial coverage may not clear all obstacles to payment.   Even if a new technology successfully demonstrates commercial coverage, it still must demonstrate that it is safe and effective and not investigational or experimental. This alone can be a formidable obstacle, since there are no formal objective criteria for making these determinations. In addition, even if the commercial coverage is demonstrated, coverage still may be denied on the basis of “appropriateness” criteria if “evidence supports that differences between Medicare beneficiaries and commercially insured individuals are clinically relevant.” Finally, CMS indicates in the Proposed Rule that if Medicare coverage is allowed based on the availability of commercial payer coverage, limits on coverage comparable to those imposed by commercial.  Query whether such a policy opens a back door to the use of prior authorization in the Medicare Fee-for-Service environment.

Expedited Coverage for “Breakthrough” Devices

The Proposed Rule also would establish a new Medicare Coverage of Innovative Technology (MCIT) pathway to accelerate the coverage of new, innovative breakthrough devices to Medicare beneficiaries. The proposed MCIT coverage pathway is specifically for Medicare coverage of devices (including device-led combination products) that are designated as part of the Food and Drug Administration’s (FDA) Breakthrough Devices Program and are FDA market authorized. Assuming that a breakthrough device falls into a statutorily authorized coverage category, national Medicare coverage under the MCIT pathway would begin immediately upon the date of FDA market authorization (that is, the date the medical device receives Premarket Approval (PMA); 510(k) clearance; or the granting of a De Novo classification request) and would last for four years.  During this period, manufacturers are encouraged to gather clinical data to support continued coverage.

While the Proposed Rule would limit this new pathway to medical devices, CMS is soliciting comments on whether it should be extended to drugs, diagnostics,  and biologics and to products that meet the standards established under other FDA programs.

The Breakthrough Devices Program is for medical devices and device-led combination products that meet two criteria.  First, the FDA must find that the device provides for more effective treatment or diagnosis of life-threatening or irreversibly debilitating human disease or conditions. Second, the device must satisfy one of the following elements:

  • It represents a breakthrough technology;
  • No approved or cleared alternatives exist;
  • It offers significant advantages over existing approved or cleared alternatives and meets certain other statutory conditions; or
  • Device availability is in the best interest of patients

The number of technologies that will be eligible for coverage under the new pathway is not clear.  There are currently 16 Breakthrough Devices, and CMS’s budget estimates suggest that CMS  anticipates  that two manufacturers would elect to utilize the MCIT pathway in the first year, three manufacturers in the second year, four manufacturers in the third year, and five manufacturers in the fourth year of the new policy

Since four years of coverage is a considerable enticement, and it seems likely that the FDA will see a significant increase in requests for Breakthrough designation if the Proposed Rule is adopted without change. Nonetheless, manufacturers of new medical devices are best advised to give careful consideration to the pros and cons of seeking coverage through the alternative pathway before lining up.   The Proposed Rule confers an advantage if but only if, it is anticipated that coverage will pose a substantial obstacle to payment:  Many devices subject to FDA clearance are sufficiently similar to products that are already on the market that coverage is not a significant issue.  Rather, often the question is whether additional payment is available over and above the payment generally available for similar devices or for services that utilize similar devices. .  The utility of this new pathway, then, should be examined on a case by case basis. For example, it is unclear whether, and to what extent, designation as a breakthrough device will impact the likelihood of a device covered as Durable Medical Equipment will obtain a HCPCS code distinguishing it from other functionally comparable devices.  Nor is it clear whether designation as a breakthrough device used in conjunction with a physician’s service will impact the likelihood of obtaining a new CPT code for the service involved or whether such designation will impact payment for the associated physician’s service under Medicare’s Physician Fee Schedule.  Likewise it is unclear whether the use of a  breakthrough devices in conjunction with a hospital outpatient service will be considered in determining whether the service will be eligible for a “complexity adjustment” that increases payment or whether the service will be classified into a New Technology Ambulatory Payment Classification.  On the other hand, rules finalized last year do provide payment advantages for breakthrough devices used in inpatient settings that seek New Technology Add- On Payment.  In addition, breakthrough medical devices used in hospital outpatient departments are deemed to meet certain (but not all) of the criteria for additional payment under the Hospital Outpatient Prospective Payment System new device pass through provisions.

All in all, the Proposed Rule represents a significant step forward for developers of new technologies.  The establishment of an expedited pathway to coverage for truly innovative breakthrough technology is much needed and has the potential to incentivize the development of life-saving therapeutics and diagnostics.  And CMS is to be commended for focusing attention on the need for more clarity and uniformity in defining “reasonable and necessary” care. The ball is now in the court of patient advocates, provider groups, and innovators to help CMS fill in the details that will make a real difference in Medicare patients’ access to new technologies.  If you have any questions about how the Proposed Regulation may impact your technology or your patients or how to impact the Final Rule, please contact Diane Millman (Diane.Millman@PowersLaw.com) or Rebecca Burke (Rebecca.Burke@PowersLaw.com).