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Is Medicare Being A Little Too Careful?

Is Medicare Being A Little Too Careful?

Dr. David M. Steinhaus hates telling his elderly patients that America's vaunted medical system won't give them the best available care. But that's just what Medicare is forcing him to do, he says.

Until a year ago, the Kansas City (Mo.) cardiologist routinely implanted the most advanced pacemaker or defibrillator into people whose hearts needed the electric shocks those devices provide. Not anymore. Medicare now refuses to reimburse hospitals and doctors for procedures that use so-called investigational devices--those that haven't yet been officially approved by the Food & Drug Administration, but may be accepted by doctors. As a result, Steinhaus' patients over age 65--most of his practice--end up with dated technology. "It's utterly ridiculous," he fumes. "How many patients have to leave the hospital without the best devices, or perhaps even die, before the government does something about this?"

Steinhaus isn't the only one who's livid. The flap over Medicare reimbursement for investigational devices has become a major issue for many medical-device companies. To develop new technology, the industry depends on getting paid for these experimental devices, which can cost thousands of dollars apiece, explains Ronald A. Matricaria, CEO of St. Jude Medical Inc. in St. Paul, Minn. "But all of a sudden, they changed the rules," he says. One example: U.S. hospitals shut down clinical trials of St. Jude's improved heart valves, even though the valves could save Medicare money because they last longer.

HIGH STAKES. Such devices are still in the development and testing stage, of course. But they are typically refinements of proven technology and therefore not as risky as a totally new device. Even so, both types require FDA approval. Increasingly, however, the testing of investigational devices isn't being done in the U.S. A new survey of medical-device makers funded by the Health Industry Manufacturers Assn. (HIMA) shows that more than two-thirds plan to move clinical trials of implantable devices to Europe, Canada, or other countries because of the reimbursement controversy. Industry experts warn that this trend could pull U.S. doctors off the leading edge of medical innovation--and transfer technology and jobs abroad.

Given such high stakes, hospitals, physicians, and medical companies are mounting a legal assault to change Medicare's policy. On May 1, a group of 23 hospitals--including powerhouses such as Mount Sinai, Johns Hopkins, and UCLA Medical Center--filed suit in U.S. District Court for the Central District of California against the Health & Human Services Dept. (HHS). They charge that the rule was issued illegally under the Administrative Procedure Act.

In addition, lobbyists are working with Representative William M. Thomas (R-Calif.) and Senator Orrin G. Hatch (R-Utah) on drafting a fix. "We are hoping Medicare comes to its senses," says Steven Speil, associate vice-president for policy at HIMA. If not, he adds, the bill should do the trick.

Go ahead and get the lawmakers involved, say regulators. Sources at the Health Care Financing Administration (HCFA), which administers Medicare, say HCFA favors a legislative solution to a bureaucratic problem. Trouble is, the bill may have a tough time finding a place on Congress' crowded agenda.

The seed for this controversy was planted back in 1986, when HCFA issued a manual to Medicare payers. One provision among many stated that "medical procedures or services performed using devices which have not been approved for marketing by FDA" were not to be covered. The intent was to ensure that people got treatments only after the FDA deemed them safe.

But the policy was almost universally ignored for years. Hospital officials claim they either weren't aware of it or didn't believe it applied to most investigational medical devices. Whatever the reason, many of the nations' top hospitals routinely billed Medicare for procedures using these devices. HCFA claims it had no idea this was general practice.

This cozy mutual ignorance was shattered a year ago when a still-unnamed whistle-blower filed a citizen's suit in Seattle. It accused hospitals of defrauding the government by charging for unapproved devices, leading HHS sleuths to investigate. They subpoenaed a decade of records from 130 U.S. hospitals representing "a real who's who" of cardiac care, says Susan C. Waltman, general counsel of the Greater New York Hospital Assn. The hospitals' response was to halt virtually all clinical trials involving Medicare patients.

"FRUSTRATING." In some cases, the impact on the quality and cost of care was dramatic. Cardiac arrest survivors typically need defibrillators to shock their hearts back to normal whenever the fragile organ races out of control. For several years, the standard device was so large that it had to be implanted in patients' abdomens. But Minneapolis-based Medtronic Inc. built a much smaller version that could fit in the pectoral region. In trials at the Mayo Clinic, says cardiologist Stephen C. Hammill, the new device reduced deaths from the actual operation from 3.8% of patients to zero--and cut hospital costs after implantation from $24,000 to $13,000. Yet Mayo's doctors could no longer use the device for Medicare patients--unless they found another way to pay the bills.

The FDA approved the smaller defibrillator this spring, making it eligible for Medicare reimbursement. But now, Hammill can't use an even better version, which needs only one wire threaded into the heart instead of two. "It's frustrating," says Hammill. "We are falling behind Canada and Europe in what we can provide for our patients."

Meanwhile, the Health Dept. Inspector General's office is finishing its fraud probe, which sources say is largely a fizzle. Investigators appear ready to seek indictments against only a handful of doctors or hospitals that clearly knew about the HCFA policy yet charged for investigational devices. Most of the nations' top medical centers won't be accused of fraud. As outcomes go, it will be small potatoes--and small consolation to patients who, as a result, are now stuck with yesterday's technology.

To Pay or Not to Pay

Legal fights have led hospitals to obey a long-ignored directive denying Medicare reimbursement for non-FDA-approved medical devices. The policy was designed to protect the elderly from potentially unsafe experimental devices. Instead, physicians, hospitals, and companies say, the policy is having these negative effects:

Most patients over age 65 no longer have access to the most advanced pacemakers, defibrillators, or heart valves.

In some cases, costs to taxpayers are higher, since devices that work better and last longer save money.

Medical-device companies are moving clinical trials of new devices to other countries. As a result, U.S. physicians will be less familiar with the devices when they are eventually approved.