Practical Advice for Medical Devices Firms | Page 10

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There are additional factors that may be taken into account with regard
to payment, such as regional labor costs.
If a product is an adjunct to treatment of an in-patient illness for which
there is a MS-DRG payment, there is no mechanism of separately paying
for the device. Hospitals are given a flat amount of money to cover all
expenses involved with an inpatient hospitalization, including but not
limited to lab tests, medications, disposable supplies, and human
resources expenses. If the hospital costs are less than the money
received, the hospital makes a profit. If the costs are more, then there is
a loss. Therefore it is incumbent upon device manufacturers to
demonstrate value, such as decreased length of hospital stay, intensive
care unit stay, or need for healthcare personnel.

Physician reimbursement
Manufacturers must be cognizant of whether or not there will be a
professional reimbursement associated with use of their product.
Physicians are reimbursed for professional services under the Current
Procedural Terminology (CPT) system, which is also referred to as the
level I HCPCS designation. There are approximately 8000 CPT codes in
existence. A CPT editorial panel is responsible for maintaining the
database. They revise, modify, and update the codes.
Of the 17 members of the panel, 11 are physicians nominated by the
American Medical Association, while additional members are nominated
by other groups, such as Center for Medicare and Medicaid Services, Blue
Cross and Blue Shield, and the American Hospital Association. There are
three categories of CPT Codes (see Box). If a placement of a medical
device is associated with a Category I code, the physician will generally be
paid for the service. A Category II code is generally considered a tracking
code not associated with reimbursement, although in the future this may
have a role in "increased payment for quality." Category III codes are paid
at the discretion of local carriers and may be difficult to obtain.

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