By Blair Burnett

The main topic of discussion at a recent American Health Lawyers Association (AHLA) conference held in Washington, DC focused on initiatives to  reduce overall costs to the healthcare system, and how the pending Patient Protection and Affordable Care Act (PPACA) will further this goal of lowering the cost impact, while providing optimal care to patients.

What is the PPACA?

PPACA, also known as the ‘Affordable Care Act,’ is a complex piece of legislation aiming to improve U.S. healthcare as a whole, with a primary goal of decreasing cost by reducing waste in the healthcare industry. Many speculate that waste accounts for 20-30% of current healthcare costs, and that this waste is costing the government and the tax payer billions of dollars per year. PPACA relies on two initiatives to lower costs and reduce waste: (1) The “Sunshine” provision and (2) Comparative Effectiveness Research (CER).

Federal Sunshine Act

PPACA progresses and reiterates the trend of the last decade to provide more transparency in healthcare transactions by mandating disclosure of all financial interactions between the healthcare provider and the device/drug manufacturer. According to PPACA, beginning on January 1, 2013 all medical device and pharmaceutical companies will have to disclose and report to CMS all payments and transfers of value to physicians. The form of the payments, e.g., cash, stock, stock options, services will have to be reported, along with the nature of the payment e.g., consulting fees, gifts, food, travel, entertainment, charitable donations.  Failure to disclose such information to CMS will result in civil monetary penalties. Additional information on specific requirements and penalties is available online.

Upon receiving the reported information, CMS will create a database accessible to the public including all of the disclosed data. A patient will be able to see exactly how much payment, if any, their physician has received from certain companies. This transparency will allow the patient to make a much more informed decision about their medical needs, which in turn will reduce the waste associated with healthcare costs.

What does Sunshine mean for you?

Medical device companies will have to start tracking and reporting payments to CMS starting January 2013. This topic has been discussed before in a previous MCRA blog post by MCRA Healthcare Compliance Vice President, Christopher Gingras: Preparing for Next Year’s Patient Protection Affordable Care Act Disclosures.

Below is a summary of things to consider as you prepare for the disclosure period:

  • Does the organization have systems in place to easily track and report this data when needed?
  • Can the accounting system identify every payment made to a physician and place it in the appropriate category?
  • Is the company prepared for the scrutiny that will come once all of this data is available publicly?
  • Has the company taken steps to educate its physician partners that these payments will become public? Could it impact their decision to partner with the company?
  • Has the company evaluated the robustness of its financial disclosure and conflict of interest disclosure process?

Comparative Effectiveness Research (CER)

A more controversial aspect of PPACA is its support for mandatory CER as a way to reduce healthcare costs.  PPACA defines CER as “research evaluating and comparing health outcomes and the clinical effectiveness, risks, and benefits of two or more medical treatments and services”. PPACA established a new Patient Centered Outcomes Research Institute (PCORI) that is primarily responsible for the execution of CER. PCORI will manage funding and assist in designing research studies. The goal of the mandated CER is to determine the most beneficial treatments in terms of clinical effectiveness and monetary cost. The results of the research will be made available to physicians and the public, which allows for more informed decisions to be made about treatments, thus reducing waste.

What does mandatory CER mean for you?

  • Medical device companies should monitor closely the developments of the PCORI.
    • Familiarize yourself with the methods and qualifications that PCORI will use to determine Comparative Effectiveness.
    • Assess company competencies in the realm of health economics

PPACA is a monumental piece of legislation that will impose substantial changes on the healthcare system, no matter how the Supreme Court rules in June.  Reducing waste and lowering cost is the cornerstone of the act, and the new rules are perfectly navigable if you understand and prepare for them.

Contact MCRA’s Health Economics, Reimbursement & Public Policy experts for advice on ways to prepare for the changes implicated in the PPACA legislation.

Daria Harlin, J.D. also contributed to this article.