CMS Addresses Antibiotic Resistance with IPPS Medicare Payments

August 08, 2019 - The FY 2020 IPPS final rule included a slew of Medicare payment updates, including a 3.1 percent boost in hospital reimbursement and a new hospital wage index system. But also contained within the 2,273-page rule are major updates to how Medicare addresses antibiotic resistance.

Highlighted in a new CMS blog post, antibiotic resistance occurs when individuals infected by bacteria are resistant to existing antibiotic drugs. More than two million Americans experience antimicrobial resistance each year, resulting in thousands of deaths annually. Many of those casualties are elderly, Medicare beneficiaries.

CMS reported in the post that the majority of new diagnoses of drug-resistant infections and resulting deaths in hospitals involve Medicare beneficiaries.

Addressing antibiotic resistance is a top priority for CMS, which is looking to simultaneously improve patient outcomes and reduce costs, especially those stemming from costly, unnecessary hospital stays.

However, tackling the condition has been a challenge for CMS and the healthcare system as a whole because of Medicare’s current volume-based payment approach through the IPPS, CMS Administrator Seema Verma explained in the blog post.

The CMS head partly blamed Medicare payments for the commercial failure of ZEMDRI, a novel treatment for complicated urinary tract infections that received over $200 million in funding from the government. Medicare payments were “insufficient at capturing the full public health benefit of the antibiotic, causing taxpayer dollars to be used inefficiently and potentially leaving seniors without access to a needed new innovation,” she stated.

To remove the Medicare payment barrier, CMS included several policies in the FY 2020 IPPS final rule, including an alternative pathway for the new technology add-on payment for drugs considered “Qualified Infectious Disease Products” (QIDPS) by the FDA.

Historically, providers have not been able to bill Medicare a new technology add-on payment for antimicrobial drugs. CMS would not reimburse the supplemental payment because of limitations on clinical trial designs and misaligned incentives that restricted the use of and payment for new antibiotics in hospitals, Verma explained.

But the alternative technology add-on payment pathway for QIDPs will allow hospitals to receive additional reimbursement for prescribing antimicrobial drugs to Medicare beneficiaries.

Under the new pathway, drugs do not have to meet the clinical improvement requirement for the new technology add-on payment. CMS also finalized a 25 percentage point boost in the payment rate, bringing the new rate to 75 percent.

Alternative technology add-on payment pathways will also impact other medical devices and drugs, CMS stated in the FY 2020 IPPS final rule.

The federal agency also finalized an alternative pathway for medical devices that will allow products to qualify for Medicare payment if the device is subject to the FDA’s Breakthrough Devices Program and has received marketing authorization of the FDA. The device will not be subject to the clinical improvement criterion starting in 2021.

“President Trump is strengthening Medicare by clearing the way for Medicare beneficiaries to access the same transformative technologies and treatment options emerging in the private market,” Verma said in the rule’s announcement. “Through our efforts to improve transparency and reduce regulatory burden, we are hearing more than ever from innovators who want to work with us so that Medicare beneficiaries have access to the latest advances in healthcare.”

However, industry stakeholders, including the Medicare Payment Advisory Commission (MedPAC), have expressed concerns over the new technology add-on payment pathways.

“[T]he Commission does not support the use of the FDA’s Breakthrough Device Program for qualification for NTAP unless the drug or device in question also meets the current substantial clinical improvement criterion—that is, unless there is some evidence that the new technology results in improved care for beneficiaries,” Francis J. Crosson, MD, MedPAC’s Chairman, told CMS prior to the final rule. “The Commission maintains that the Medicare program, not the FDA, should adjudicate spending determinations based on the specific needs of the Medicare population.”