Editor’s Note: Kuo Tong is the Founder and President of Quorum Consulting, Inc., a company that consults with clients in the pharmaceutical, biotechnological, and medical device manufacturing industries. Quorum Consulting has offices in San Francisco, Calif. and Fairfax, Va. Tong works with his clients to understand how economic, financial, and reimbursement forces can be managed and how to influence product acceptance and utilization. He will be speaking at an upcoming N.C. Medical Device Organization event on Nov. 29 at the CED Entrepreneurship Center. This column is the latest in the Entrepreneurial Spirit series done in partnership between the Council for Entrepreneurial Development and WRAL Local Tech Wire.

RESEARCH TRIANGLE PARK, N.C. – The following statements appeared in the same Medicare press release issued on Aug. 1, 2006:

“The Centers for Medicare & Medicaid Services (CMS) today issued a final rule that takes significant steps to improve the accuracy of Medicare’s payment.”

“Overall, the final rule is estimated to increase payments by $3.4 billion.”

“The changes will reduce incentives to invest in certain service areas because payment rates significantly exceed costs.”

According to these statements, it appears that Medicare will be spending $3.4 billion more dollars on health care for Medicare beneficiaries. However, Medicare also appears to be taking “significant steps” to make sure that payment rates do not exceed costs.

But what about the added costs of innovation. Innovation that improves provider efficiency, reduces patient risk, and enhances patient outcomes. Do these changes reduce payments at the risk of stifling progress? And shouldn’t Medicare create incentives to invest in certain areas that yield higher margins if they improve patient care?

Understanding the maze that is the Centers for Medicare & Medicaid Services (CMS) requires an ability to be fluent in the language of reimbursement.

What’s the difference between HCFA and CMS? If you are in the hospital setting, are you afflicted by the HIPPS or HOPPS?

For a laboratory test, is it better to be reimbursed under the MPFS or CLFS?

And why is it that some technologies fall under an existing AMA CPT code, some have to use NOC codes, and others use HCPCS codes?

And how can I know if I can get an add-on payment, a new technology payment, or a transitional pass through payment?

An upcoming NCMD event, on Nov. 29 at the CED Entrepreneurship Center, will provide insights into what Medicare and other payers are thinking when they develop new reimbursement policies and how medical device entrepreneurs can impact policies to reflect that value of their technologies.

Reimbursement Glossary:

  • American Medical Association Current Procedural Terminology

  • CLFS — Clinical Laboratory Fee Schedule

  • CMS — Centers for Medicare & Medicaid Services (CMS)

  • HCFA — Health Care Financing Administration

  • HCPCS — Healthcare Common Procedure Coding System

  • HIPPS — Hospital Inpatient Prospective Payment System

  • HOPPS — Hospital Outpatient Prospective Payment System

  • MPFS — Medicare Physician Fee Schedule

  • NOC — Not Otherwise Classified
  • CED: www.cednc.org