They Are Paying US What?! Can

TAVR Ever be Financially Viable? Wilson Y. Szeto, MD

Associate Professor of Surgery

Surgical Director, Transcatheter Cardio-Aortic Therapies

Associate Director, Thoracic Aortic Surgery

Division of Cardiovascular Surgery

University of Pennsylvania Medical Center

Philadelphia, PA

TCT@AATS: New Technologies for A New Future

AATS 2013

Disclosure

Edwards Lifesciences

PARTNER trial Sub-Investigator

PARTNER II Steering Committee

Clinical Proctor

Micro Interventional Devices

Consultant

Can We Afford TAVR?

The Cost to Society

No Survival Benefit STS > 15

“Cohort C”

TAVR Drift Into Lower Risk Patients

Operable AS patients

90% 10%

Low-Intermediate Risk High Risk

Inoperable

Too Sick

II A A High

Risk

B Extreme

Risk

C

Courtesy M. Leon

New patients - increasing

50%?

Why grow TAVR as a Service Line?

Pro:

• Part of core mission of a multidisciplinary advanced valve program

• Strategic link to valve surgery – AVR is profitable

• “Upstream & downstream” activity – relatively minor

• ”Halo effect” – real but difficult to quantify

Con:

• Unprofitable on its own

• Resource intensive – opportunity cost to develop other services

• Few options to improve the financials – by hospitals or physicians

8

Contribution Margin of Various Cardiac Treatments

Surgery - Valve

PCI

EP - AICD / Pacemaker

Surgery - CABG

Medical - ArrhythmiaMedical - Heart Failure

Medical - ASC

Surgery - Other

Medical - ACS EPS

AAA

Surgery - Vascular Vascular - Interventional

Other

Medical - OtherMedical w Cath

TAA

Transplant / VAD

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

- 100 200 300 400 500 600 700 800 900 1,000

Ave

rage

Con

trib

utio

n Pe

r Ca

se

Case Volume (Primary Cardiovascular Diagnosis )

Most Desirable

Least Desirable

Increase Volume

Increase Efficiency

Key:1) Bubble Size = Total Contribution2) Axes Cross at Averages (393, $12,075)

Valve procedures are highly profitable; generating a healthy average

contribution margin and per case gain

9

50% of growth in valves: “Partner Effect”

Accelerated slope

since initiation of TAVR

program

HUP – Valve primary procedure volume

10

Expired prior to decision

88

9.3%

Enrolled for TAVR trial

(Partner 1 & 2)

258

27.5%

Enrollment Failure

427

45.5%

Total TAVR Referrals 11/2007 – 10/27/2011

4 Year Total = 939

AVR +/- Concomitant

128

30.0%

Medically Managed

299

70.0%

Pending Workup / Decision

166

17.7%

To enroll 258 patients, 939 were evaluated

Of patients evaluated, approximately:

1 is 4 enrolled

1 in 8 is not enrolled but has open AVR

Results: 12-Month Follow-up Costs

D=($26,025)

D=$705 D=1,870 D=$79

Total F/U Costs (12 months)

TAVR $29,352

Control $52,724

D = $23,372

p<0.001

15,586

2,316 3,223

1,126

14,069

4,666

2,397

833 $0

$5,000

$10,000

$15,000

$20,000

Hospitalizations Rehab SNF Other Outpatient

TF-TAVR (n = 239) AVR (n = 217)

12-Month Follow-up Costs Transfemoral

D = $1,517

D = ($2,350)

D = 827

D = $293

Total F/U Costs (12 months)

TF-TAVR $22,251

AVR $21,965

D = $287

P = 0.97

Post FDA Approval

The Real World Financial Reality

PAYMENTS

Physician Pro fee payments are procedure-specific

Hospital payments aren’t

Pro Fee Coverage

FDA Approval

• TF & TA are FDA approved for all indications

• Covered by the CMS NCD for TAVR

As long as all other conditions of the NCD are met

Coverage

• Multi-discipline team approach between Cardiologist and Surgeon required

– Op notes must reflect co-surgery approach.

– “62” modifier recommended by CMS for both TF & TA

• Two face-to-face cardiac surgery evaluations prior to the procedure are required

• Private payers are creating coverage.

– Case-by-case approval often required for TA or High Risk indications for non-

Medicare patients

All patients need to be registered in the TVT Registry regardless of

payer

Pro Fee Coding 62.5%

to each

operator

PA Medicare Rates New CPT

Codes 2013Description Approach wRVUs

33361 - 62 TAVR with prosthetic valve; percutaneous femoral artery approach 25.13 $1,502.00 $938.75

33362 - 62 TAVR with prosthetic valve; open femoral artery approach 27.52 $1,643.00 $1,026.88

33363 - 62 TAVR with prosthetic valve; open axillary artery approachAxilliary

artery28.50 $1,701.00 $1,063.13

33364 - 62 TAVR with prosthetic valve; open iliac artery approach Iliac artery 30.00 $1,809.00 $1,130.63

33365TAVR with prosthetic valve; transaortic approach (eg, median sternotomy,

mediastinotomy)TAo 33.12

0318T - 62Implantation of catheter-delivered prosthetic aortic heart valve, open thoracic

approach, (eg, transapical, other than transaortic)TA

n/a ─ we

use 33.12

33367TAVR with prosthetic valve; cardiopulmonary bypass support with

percutaneous peripheral arterial and venous cannulation (eg, femoral vessels)

(List separately in addition to code for primary procedure)11.18

33368TAVR with prosthetic valve; cardiopulmonary bypass support with open

peripheral arterial and venous cannulation (eg, femoral, iliac, axillary vessels)

(List separately in addition to code for primary procedure)

14.39

33369TAVR with prosthetic valve; cardiopulmonary bypass support with central

arterial and venous cannulation (e.g., aorta, right atrium, pulmonary artery)

(List separately in addition to code for primary procedure)19.00

Effective January 1st, 2013

Deleted for 2013: 0258T, 0259T

Note: There are no RVUs for "T" codes. For internal purposes, we used 41/case.

TAVR Professional Charges

Femoral

artery

varies with carrier

Primarily

TA & TAo

PERFUSION

Add-on to Primary CPT:

33361, 33362, 33363,

33364, 33365, 0318T

Surgery Only

Replaces

0256T

Review of profitability measurement at UPHS

Revenue Payments, including IME & GME

─ Direct Cost Prices paid for billable services & supplies

Contribution to Overhead Earnings to apply to overhead

+ Indirect Revenue Funds not tied to specific patient stays, e.g., tobacco

settlement funds, emergency access grants

─ Indirect Cost Costs not tied to specific patient stays aka Overhead -

building, equipment, admin, malpractice, utilities, advertising

Gain/(Loss) Funds available for investment/

expansion/ replacement & upgrades

or losses to be subsidized

Bottom Line

Medicare pays hospitals by MS-DRG

To Medicare these are all the same thing

MSDRGs 216 – 221

“Valve surgery”

• Endovascular / Transapical replacement of aortic valve

• Endovascular / Transapical replacement of pulmonary valve

• Endovascular replacement of unspecified heart valve

• Open heart valvuloplasty without replacement

• Open and other replacement of heart valve

• Annuloplasty

• Insertion of percutaneous external heart assist device

• Resection of other thoracic vessels with replacement

• Endovascular implantation of graft in thoracic aorta

TAAs

Root Hemi Arch

Ascending Hemi-arch

Ascending Hemi with

TEVAR

TEVAR

Thoracoabdominal

Medicare payment basics

$ Medicare payment

Hospital base determined

by several factors

$ Hospital-specific base rate

Indirect medical education

Disproportionate share

Regional wage rate adjustment

others

Determined by CMS x MS-DRG weight

As a result:

• HUP rates are 61% higher

• PPMC rates are 38% higher

• Medicare payments are 17% higher at HUP than PPMC for the same

procedure.

• HUP receives the 135th highest Medicare case rate in the country, PPMC

is 366th.

HUP - #8

PPMC - #185

University of Michigan - #24

New York-Presbyterian - #86

Massachusetts General - #97

Mayo St Mary - #150

Northwestern Memorial - #187

Medicare MS-DRG 219 payment 3 different hospital rates

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

$90,000

$100,000

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Cu

mu

lati

ve $

Day Of Stay

HUP rate $72,959

Transfer penalty

“National” rate $45,409

PPMC rate $62,581

The cost of the valve is significant

Patient “PC” May 2012

4 hours of OR time includes perfusion, anesthesia, prep & recovery, intra-operative monitoring, additional cath & OR staff

Ancillary includes PT, RT, EKG

Department 1 2 3 4 5

OR Supplies 32,825

01305192 TAVIAORTIC VALVE 32,500 32,500

01304336 CATHETER ANGIOPLASTY NON LA 325 325

OR time 4,288 4,461 10%

Nursing - Med/Surg 802 802 802 2,405 5%

Nursing - SICU 1,606 1,606 4%

Lab 289 230 653 106 19 1,297 3%

Pharmacy 43 467 170 96 25 802 2%

Ancillary 176 110 144 69 87 413 1%

Imaging 36 26 143 26 62 293 1%

Total Direct 1,346 39,552 1,912 1,100 193 44,101 100%

Total Indirect 942 11,274 1,338 770 135 14,459

TOTAL COST 2,288 50,826 3,250 1,870 327 58,561

Day of Stay

74%

Total% Direct

Cost

OR Supplies, driven

by valve, are 74% of

direct cost

Medicare payment basics

$ Medicare payment

$ Hospital-specific base rate

Indirect medical education

Disproportionate share

Regional wage rate adjustment

others

x MS-DRG weight

Under certain conditions this

payment is reduced

For TAVR MS-DRGs, hospital payment is reduced when:

– LOS is at least one day less than the GLOS

– Patient is transferred to another hospital

or

– discharged to home health care when the patient receives clinically

related care within three days of discharge

http://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNProducts/downloads/AcutePaymtSysfctsht.pdf

Federal Register Pages 51,709-51-711

Determining the payment:

Transfer Rule

TAVR MS-DRG Payments

w MCC w CC - w MCC w CC -

216 217 218 219 220 221

GLOS 14.1 9.4 7.0 10.4 6.9 5.2

HUP 88,595 59,096 49,727 72,959 48,805 41,168

PPMC 75,992 50,690 42,654 62,581 41,863 35,311

National 55,141 36,781 30,950 45,409 30,376 25,622

Valve Cost 32,500 32,500 32,500 32,500 32,500 32,500

HUP 56,095 26,596 17,227 40,459 16,305 8,668

PPMC 43,492 18,190 10,154 30,081 9,363 2,811

National 22,641 4,281 (1,550) 12,909 (2,124) (6,878)

Without CathWith Cath

Full

Medicare

Payment

Amount for

patient

care

MS-DRG

Important for

the transfer

rule

Transfer payments

Day of Discharge 216 217 218 219 220 221

1 31,481 22,303 19,896 27,071 19,590 17,739

2 33,436 24,260 22,107 29,254 21,791 20,202

3 35,392 26,216 24,318 31,437 23,993 22,666

4 37,347 28,173 26,528 33,620 26,194 25,130

5 39,303 30,129 28,739 35,803 28,395 25,622

6 41,258 32,085 30,950 37,986 30,376

7 43,213 34,042 40,170

8 45,169 35,998 42,353

9 47,124 36,781 44,536

10 49,079 45,409

11 51,035

12 52,990

13 54,945

14 55,141

55,141 36,781 30,950 45,409 30,376 25,622

Transfer rule payments

216 217 218 219 220 221

GmLOS 14.1 9.4 7.0 10.4 6.9 5.2

Full Payment 55,141 36,781 30,950 45,409 30,376 25,622

MS-DRG

PAYMENT BY LENGTH OF STAY UNDER THE TRANSFER RULE

National Rate (no IME or DSH)

Valve Cost 32,500 32,500 32,500 32,500 32,500 32,500

Amount for

Patient Care22,641 4,281 (1,550) 12,909 (2,124) (6,878)

Amount for

Patient Care

Conclusions

Fairway is narrow

• Short LOS often incurs transfer penalty

• Long LOS increase case cost

Only a few AMCs (hospitals with high IME payments) are

likely to cover their costs

Little room to improve the financial picture

TAVR (in isolation) is not profitable for most hospitals

Medicare rules change every year

Decreased valve cost could change it completely

Recommendations

Audit your program

Meet with your coders

Understand length of stay and site of stay

Understand the transfer penalty

Obtain the most appropriate reimbursement (DRG)

Photo By Thinkstock

Track patients

Analyze Cost

“Acute on Chronic diastolic heart failure”