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Medicare New Technology Add-On Payments

By Anthony Lewis, Data Analyst - Financial Reimbursements Services

In the Medicare Hospital Inpatient Prospective Payment System (IPPS) proposed rule for fiscal year (FY) 2020, the Centers for Medicare and Medicaid Services (CMS) stated that hospitals utilizing transformative new medical services or technologies may be allowed an additional payment under the New Technology Add-On Program (NTAP).  One of the criteria is whether the new service/technology is disproportionately costly compared to the existing MS-DRG rate for the service/technology.

In the proposed rule, this additional payment would be equal to the lesser of:

  • 50% of the cost of the new service/technology
  • 50% of the amount by which the costs of the case exceed the DRG payment

CMS received comments from stakeholders that stated the 50% limit was too low in regards to the high cost associated with the therapies used to treat patients with certain conditions.  For example, Chimeric Antigen Receptor (CAR) T-cell therapy, used to fight certain types of cancers, can cost as much as $375K for a one-time treatment depending on the cancer type and treatment regimen.

In response to the numerous public comments, CMS has finalized an increase in the maximum add-on payment from 50% to 65% of estimated cost and up to 75% of estimated cost for certain qualified infectious disease products (QIDPs).  Furthermore, CMS will be making new technology add-on payments for 18 technologies.  After careful consideration of public comments from the proposed rule, CMS has approved 9 of the 13 applications for new technology add-on payments discussed in the proposed rule where the technology received approval by the Food and Drug Administration (FDA) by July 1, 2019.  CAR T-cell therapy, one of the more costly technologies mentioned earlier, has been confirmed by CMS to receive continued payments.  Overall, CMS estimates that the increase in payments to recipients under the NTAP will total $94 million in FY 2020.

The other criteria finalized in this rule to meet the additional payment is that the service/technology is new and shows substantial clinical improvement over existing services/technologies.  The FDA’s Breakthrough Devices Program, created to assist in the development and review of transformative new devices utilized by providers, dictates whether a device meets its expedited program criteria (e.g., the device intends to treat serious or life-threatening diseases or conditions for which there are unmet medical needs).  Such devices would then receive market authorization (e.g., approval or clearance) if they show that substantial clinical improvement would be achieved with their use.  An issue voiced by stakeholders in the proposed rule was the fact that the approval of a device that is subject to expedited program criteria could possibly lead to situations where the evidence base for demonstrating substantial clinical improvement in accordance with CMS’s NTAP payment policy was not realized at the time of marketing authorization by the FDA.  To address this issue CMS has finalized an alternative new technology add-on payment pathway for transformative medical devices that receive FDA marketing authorization through the Breakthrough Devices Program.  Such devices will be considered new and not substantially similar to existing devices, and are not subject to the substantial clinical improvement criterion mentioned earlier.  These devices, however, must still meet the cost criteria to receive the add-on payment.  This change will go into effect with applications for new technology add-on payments in FY 2021.

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