Health agency under fire for purchasing list

Manufacturers of medical equipment such as pacemakers are trying to call Congress' attention to a little understood provision of the already embattled Health Care Financing Administration's Prospective Payment System-the "outpatient pass-through" list.

Medical device companies, led by the Health Industry Manufacturers Association, say the list was created unfairly and will encourage purchasers to buy the brand name products on HCFA's list, effectively shutting others out of the market. HCFA says it lacks the data and ability to develop a new classification system before the PPS rule takes effect July 1-but has agreed to review the applications of those who did not make the list by Oct. 1.

HCFA normally covers medical devices as part of a procedure, not as separate entities. In 1999, Congress directed HCFA to create a temporary way to pay hospitals for the cost of devices developed with newer technology-which tend to be more expensive than older ones-plus the costs of the procedure, until a system could be developed to include the newer products into the payment system.

But the medical device companies, led by the HIMA, say the temporary system HCFA has developed is based on brand names, not device types, and will create a skewed marketplace that will encourage purchasers to buy devices on HCFA's list. The medical device industry has offered to work with HCFA to develop a more general classification system, but HCFA so far has been reluctant to change its plans.

According to briefing papers obtained by CongressDaily, companies and industry groups repeatedly have offered to provide assistance to HCFA to avoid a brand name approach. Industry sources said House Ways and Means Health Subcommittee Chairman Bill Thomas, R-Calif., has discussed this issue with HCFA administrators, and the Senate Finance Committee has been briefed. But time is running out, and instructive language to HCFA that could be inserted into spending bills this year is being considered, these sources said.

Meanwhile, hospitals, medical schools and healthcare service providers also are battling HCFA over the proposed PPS.

In a letter last week, the American Hospital Association, Association of American Medical Colleges, Catholic Health Association of the United States, Federation of American Health Systems and Premier asked HCFA Deputy Administrator Michael Hash to delay the rule "until you can assure hospitals, beneficiaries and your own fiscal intermediaries that the transition can occur smoothly and accurately."

The letter cites examples of misinformation hospitals and providers are receiving about the new system, including incorrect coding information being given to providers at training sessions, billing and potential software problems, and the lack of a trial period.

The letter also says the groups want assurance from the HHS inspector general and the Justice Department that they will not pursue claims and billing mistakes for a reasonable grace period, and that HCFA should increase the Medicare payments it proposes under its contingency plan.