The Client’s Business Need

This case study demonstrates the importance of reimbursement planning commencing in the R&D phase. This study is also intended to demonstrate why health insurance payers’ coverage policy decisions, not coding, is a major reason for heath insurance payers deny reimbursement of new medical technologies, procedures and services.

A privately held startup company based in Boston, Massachusetts with 45 employees was preparing to raise its Series C round. The company is developing substantial procedural improvements to an accepted catheter-based cardiac therapeutic procedure. Collectively the improvements will translate into expanding the number of physicians and hospital outpatient centers who can perform the company’s catheter-based procedure. The U.S. launch of the company’s catheter-based therapy is at least three years away.

The company’s business need was for us to help them with the preparation for their Series C fund raising efforts. We did this by identifying the most favorable physician and hospital reimbursement pathways and to outline the plan to secure the payer approvals in the absence of reimbursement mechanisms.

Our Approach

We made three strategic decisions early in our work, they were,

1) Use comparative, not an absolute, analysis methodologies.

2) Include competitive therapies and multiple provider types.

3) Identify the Beachhead Payer.

As noted above the company initially requested us to focus our work solely on their procedure, that is to conduct an absolute analysis. We strongly believed it was to the company’s best interests to understand how competitive their market was and to better appreciate the reimbursement pathways for relevant gold standard procedures such as drug therapy, surgery and other catheter-based approaches. The company agreed.

In addition, the company initially asked us to concentrate our work on identifying physician reimbursement pathways. We concluded it was to the company’s advantage to understand the reimbursement pathways for the hospital provider and to not focus solely on the physician. We made this recommendation after reviewing hospital admission data and recent payer policy changes. These new policies placed more financial responsibly and risk for patient care on the hospital providers. As a result, the hospital would have more authority, if not more than the physician, in the purchasing decision for the company’s the equipment and catheters, referred to as the “procedure”.

Finally, we introduced to the company the planning concept of identifying the Beachhead Payer for the company’s procedure. The determination of the Beachhead Payer is one of several key strategic decisions made by companies in their reimbursement planning. To identify the Beachhead Payer, required us to write algorithms to extract multiple consecutive years of anonymized patient data from U.S. private and public health insurance payers. Following the data extraction phase, we conducted a longitudinal analysis to determine the Beachhead Payer.

The Results

Based on our payer data analytics, we recommended Palmetto as a Beachhead Payer for the following reasons,

1) Established reimbursement pathways and a lower claims denial rate relative to the U.S. commercial payers.

2) Reimbursement was possible for multiple facility providers such as the critically important hospital- outpatient centers.

3) Aggregate reimbursement amounts were less but not materially so relative to U.S. commercial payers.

4) An established patient population who could benefit from our company’s improved procedure.

Just as invaluable to our company client was an deep understanding of the Palmetto reimbursement pathways for the competitive and relevant gold standard procedures of medical (drug) therapy, surgery and other catheter-based procedures.

Our work identified hospital-outpatient and physician reimbursement from Palmetto was adequate for the company’s procedure .

We also concluded the competitive catheter-based procedures could be vulnerable to possible coverage policy changes due to overuse. If these changes were ever to be enacted, the result would most likely be a reduction in physician and facility provider reimbursement. This potential policy change demonstrates an often-overlooked fact; payers’ coverage policy decisions do affect reimbursement for new technologies. Based on the potential for the policy changes we put into place an ongoing monitoring program designed to alert the company when Medicare and (selected) commercial payers are considering changes to relevant coverage polices.

Regarding the company’s more immediate need, preparing for the Series C round, our work and findings were included in the documents and presentations shared with investors. On behalf of the company we were able to speak with investors to explain the reimbursement pathways for the company’s procedure and to put into context the risks and opportunities that lie ahead.