Researchers back outcomes-based payments for medical devices as industry braces for a shift

Policy researchers see outcomes-based device payments as a necessity, but the industry has been slow to adopt such models. (Pixabay)

Outcomes-based pricing for devices, similar to performance-driven initiatives taken by Medicare for medical services, are needed to promote accountability, according to a group of health policy researchers 

And it appears the writing is already on the wall for the industry, which has historically done well under the traditional fee-for-service model. Yet overprescribing of unnecessary or ill-fitting devices has been a problem for patients under traditional payment models, with critics arguing physicians and device makers are not held accountable for patient outcomes. 

The authors of the March 29 report, published in Health Affairs, said outcome-based pricing can "promote shared accountability for treatment value and drive the use of the right therapy for the right patient at the right time."

The approach could be particularly beneficial for cardiovasular devices that have significantly altered the way physicians treat chronic illnesses. 

However, the authors added that outcome-based pricing for devices differs from those for medications. Drug treatment is dependent on factors that don't relate to physician skill level, including adherence and medication administration, while device efficacy is dependent on the physician's skill, including placing the device in the patient.

RELATED: Democrats skeptical of Medicare payment reform efforts amid proposed funding cuts

Although adoption has been slow, outcome-based contracts "can help to improve care value for patients being considered for device placement," they wrote.

The report comes as the Medicare agency is continuing its push toward value-based payments and contracts, such as bundled payments and ACOs, as a way of lowering costs and improving care quality. 

Private payers have also taken a keen interest in such payment models.

RELATED: Payers make value-based models a priority, but regulatory and ROI uncertainty get in the way

Unlike value-based payments for medical services, outcome-based pricing for devices hasn't necessarily seen the same success so far as reducing costs. A recent study published in the Annals of Internal Medicine found such contracts did not reduce the costs of certain inhibitors.

"Although outcomes-based pricing may have a role in other settings, our analysis of its application to PCSK9 inhibitors—effective preventive medications with a high price tag—shows the potential limitation of this approach for high-cost preventive therapies," the research said. 

RELATED: Financial experts predict value-based care will drive more than half of health IT spending by 2025

But the industry may be bracing for a shift anyway, even though no value-based device purchasing programs from the Medicare agency exist and only a handful of companies offer outcomes-based pricing. 

Medtronic has taken steps to implement more outcomes-based contracts and in July 2017, the device maker announced an agreement with insurer Aetna for certain daily insulin injections. 

RELATED: HHS Secretary Alex Azar outlines 4-point plan to accelerate shift toward a value-based system

In December, the Advanced Medical Technology Association (AdvaMed) released a report saying the Medicare agency needs refinement to recognize the value of medical devices in value-based pricing programs, including adjustments to quality measures. 

The group said measures that don't take technology into consideration can lead to overuse in a number of devices, which can lead to patient harm.

The report could be an early signal that the industry is preparing to overhaul how Medicare pays for devices. AdvaMed declined to comment to FierceHealthcare.