Pressure mounts for med-tech to show its value

Many medical device companies in Minnesota are eager to take part in "value-based" arrangements in health care, which have become such a high priority under the Trump administration that federal officials want to loosen longstanding anti-fraud rules to clear the way for their development.

But more than 600 pages of proposed federal rules published in the Federal Register this week will exclude some medical device companies from getting special legal protection to enter value-based arrangements. Despite the uncertainty, med-tech firms cheered the proposals, which are open to public comment through the end of the year.

The proposed rules "will modernize [federal anti-kickback and self-dealing rules] and expand the ability of medical technology companies like 3M to participate in value-based health care programs that benefit patients through better outcomes and lower costs," 3M Medical Solutions General Manager Todd Fruchterman said in a statement provided by trade group AdvaMed.

Medical devices used to treat heart conditions and diabetes are under consideration to be eligible for special "safe harbor" protection in value-based deals, the rules say. Systems for telemedicine and remote patient monitoring are more likely to be included. Durable medical equipment, prosthetics, orthotics and supplies (a category called 'DMEPOS') are expressly excluded, the rules say.

"Value-based care" is an umbrella term covering a wide array of business arrangements among doctors, hospitals and insurers. The common element among all value-based arrangements is that participants are supposed to be paid at least partly on patients' actual health outcomes.

The arrangements are supposed to create financial incentives to focus on patient health, as opposed to the predominant "fee-for-service" model that incentivizes performing as many billable services as possible.

But traditional Medicare anti-fraud law carries steep fines and even jail time for knowingly paying kickbacks to steer patients because that can drive waste. The difference between a value-based incentive payment and a kickback may come down to a case-by-case analysis, lawyers say.

Advocates for medical device companies expect to be busy in coming months, preparing arguments and data to persuade federal officials to allow their members to take part in value-based care in the widest way possible, said Dr. Terry Chang, director of legal and medical affairs for AdvaMed.

"What we need to do," Chang said, "is help to explain the areas where it's not clear [to federal rule makers] where different device segments would be adding value, and perhaps also clarify the controls that could help alleviate the concerns about the risks that are posed."

For example, med-tech companies are going to need hard data showing their products improve patients' health, or maintain the same outcomes at lower cost. Deals that have exclusive sales terms or limits on physicians' judgment likely won't qualify for safe-harbor protection. All prices must be reasonable.

Federal officials signaled their skepticism in the text of the proposal, citing "historical law enforcement experience," as reason to closely scrutinize companies' motives. To address those concerns, "we are considering for the final rule the exclusion of some or all device manufacturers under the definition of 'VBE [Value-Based Entity] participant' and from protection under the various proposed safe harbors," the OIG's proposed rule says.

Former OIG attorney Tony Maida, now a partner a with McDermott Will & Emery, said federal officials are clearly "looking for them to make their case, because they are really on the fence."