• Have we entered a new era of cost-effectiveness?

    In Health Affairs, James Robinson claims we have:

    Insurers are tightening coverage criteria and managing utilization more aggressively. Hospitals are pushing back on the prices charged for supplies and equipment. Physicians increasingly are being paid through methods that discourage prescription of costly treatments. Consumers are being asked to pay more for their care, both through higher premiums and through higher cost sharing at the time of service. […] The new era will challenge the technology industry to improve the value of its innovations, defined as emphasizing performance improvements that justify the prices charged.

    Some details:

    The life sciences industry has won every battle but appears to be losing the war against the use of comparative clinical and cost-effectiveness research. The industry successfully lobbied Congress for provisions limiting use of comparative clinical evidence and banning the use of cost-effectiveness analysis for Medicare coverage policy. The Centers for Medicare and Medicaid Services (CMS) is also prevented from using these data in its reimbursement policies. But drug and device firms must submit comparative data when seeking coverage and reimbursement from payers in Europe and other nations. It may be difficult for these firms to avoid providing analogous dossiers to payers in the United States.

    In some cases, they already do. The pharmacy and therapeutics committees of major insurers often require drug companies to supply studies and observational data on the clinical performance of their new products; committees increasingly use these data when deciding which products to include or exclude from formularies. Firms must also supply data on the cost implications of their new products, extending beyond unit price to include cost per course of care; cost for the covered enrollee population; and, in some cases, indirect costs through impacts on workforce productivity. If the firm cannot prove that its product is meaningfully superior in safety and effectiveness, insurers may assume that it is equivalent and not superior to products already on the market. They then make coverage decisions on the basis of price.

    Data on clinical and cost performance are increasingly demanded by hospitals and integrated delivery systems as they accept capitation and other forms of prospective payment. Leading hospitals maintain technology assessment committees that draw on staff physicians and surgeons to help inform purchasing decisions with respect to implantable devices and other technologies. These committees not only assess the potential clinical and cost implications of a new technology relative to the existing inventory but also serve the cultural function of encouraging physician-leaders to consider trade-offs between price and performance. Comparative performance data may also be used in purchasing decisions by accountable care organizations (ACOs) serving the Medicare fee-for-service population, even if CMS is unable to use them directly for national coverage policy. […]

    Some hospitals are beginning to insist that prices for implantable devices not exceed a defined percentage of the procedure revenues they obtain from insurers and that supply prices follow procedure prices downward as insurers drive harder bargains.

    All this sounds plausible, but also aspirational. Studies that demonstrate improving cost-effectiveness would help the case, as well as potentially identify which of the various organizational models play key roles.


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