Outlook brighter for heart device makers after Medicare reversal
BOSTON – Stocks of heart device makers rose Wednesday after the government backed off a proposal to slash Medicare reimbursement by as much as a third for expensive but potentially lifesaving devices such as defibrillators and stents.The reversal by the Centers for Medicare and Medicaid Services lifted a cloud for device makers and hospitals, which fought cuts that would have eased taxpayers’ burden to pay for certain heart procedures but hurt hospital budgets and pressured device makers to cut prices.”It is in some senses dodging a bullet,” said Jan Wald, a medical devices analyst for A.G. Edwards & Sons. “With the level of cuts the companies were looking at, it would have been hard for them to retain their pricing levels.”I couldn’t imagine that with a 30 percent reduction in reimbursement for stents and a 20 percent reduction for defibrillators that the hospitals could have absorbed those costs alone.”After markets closed on Tuesday, the government released a rule taking effect in October that sharply reduces or eliminates many of the cuts contained in a draft proposal issued in April. The government also will phase in changes over three years rather than a single year.Device makers’ stock prices fell around 3 percent on April 13, the day after the government proposed cutting the amounts Medicare pays hospitals for heart implants that aren’t covered by private insurance. The heart device reductions were about twice as steep as many analysts had expected, and more severe than cuts involving other types of surgeries and procedures.Shares of device makers rose an average of nearly 5 percent last week as Wall Street anticipated that an industry lobbying campaign would succeed in at least partially rolling back the cuts, said Piper Jaffray analyst Thom Gunderson.The actual rollbacks announced Tuesday were deeper than Gunderson had expected.”It’s a win for the industry,” said Gunderson, who had projected the earlier proposal would have shaved around 1 percent off key device makers’ profits next year.On Wednesday, shares of Natick-based Boston Scientific Corp. gained about 1.5 percent in afternoon trading. St. Paul, Minn.-based St. Jude Medical Inc. and Menlo Park, Calif.-based Conor Medsystems Inc. – each tacked on almost 1 percent. Shares of Fridley, Minn.-based Medtronic rose 2 percent.Government officials said initially that the cuts were needed to more closely align reimbursement with the actual costs hospitals incur. The government annually revises rates for procedures covered under Medicare, the federal program for the elderly and disabled that pays $125 billion a year to reimburse 5,000 hospitals.During a 60-day public comment period, the heart device industry and hospitals questioned the data and criteria the government used to justify changes that would have been far broader than adjustments made in previous years. Hundreds of lawmakers also protested the changes, urging the Bush administration to delay the most significant ones.”What CMS and Medicare did is they capitulated, but they capitulated to the data,” Gunderson said.”CMS appears to have responded to the lobbying,” said Dr. William Maisel, a cardiologist at Boston’s Beth Israel Deaconess Medical Center, who called the initial proposal “unrealistic.”AdvaMed, a Washington-based medical devices industry lobbying group, said the rule announced Tuesday “addresses many of the concerns that were raised by patient, physician and hospital groups.””We look forward to working with the (Bush) Administration and CMS over the three-year phase-in period to further improve the accuracy of inpatient hospital payments,” AdvaMed’s statement said.Under the changes announced Tuesday, Medicare reimbursement for implanting drug-coated stents – metal-mesh devices used to prop open coronary arteries – would be cut less than 1 percent, rather than as much as 30 percent originally proposed. The cut for bare-metal stents would be 5.4 percent.Reimbursement for defibrillators – which detect and electrically correct dangerous irregularities in heart rhythm, and can cost more than $40,000 to implant – would increase about 1 percent, compared to a reduction of more than 20 percent in the original proposal.Coverage for pacemakers – which use a mild electrical current to speed a slow heartbeat – would also increase slightly, despite an initial proposal to cut reimbursement 13 percent.—On the Net:Centers for Medicare and Medicaid Services: http://cms.hhs.gov
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