EP411: Getting Paid (or Paying) for New Innovations Used in Hospitals as Part of a Procedure or a DRG—Also Bloodstream Infections and Dialysis, With Secretary David Shulkin, MD, and Erin Mistry
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[00:00:00] Stacey Richter: Episode 411, "Getting Paid or Paying For New Innovations Used In Hospitals As Part of a Procedure or a DRG. Also Bloodstream Infections and Dialysis". Today I am speaking with Secretary David Shulkin and Erin Mistry,
American Healthcare Entrepreneurs and Executives You Want To Know Talking Relentlessly Seeking Value.
Just taking a moment here to thank our relentless tribe for really getting yourselves involved in the work that I had originally kicked off to improve the outcomes for CKD, chronic kidney disease patients in this country.
With the momentum that we have so far, this relentless tribe of ours, we are really, for reals, going to produce measurable improvements for patients with CKD. So many of you, not just talking, but actually out there actively doing what you need to do so that patients do better, and it's making a difference.
I have talked to doctors, other clinicians, administrators, IPAs, other provider organizations, big and small, payers, societies, a great data company, a number of you who are consultants. It's crazy what we have been able to build so far, and we've been doing this for less than a year. The Relentless Tribe, let me tell you, we move mountains.
We get patients properly diagnosed. We get them into appropriate treatment plans. What restores my faith in these rough times, we have encountered one PCP, one clinician after another, and the second that we show them the as per the guidelines way to accurately diagnose and stage chronic kidney disease.
Which is not just using EGFR for those clinicians who might be listening. Yeah, that's it! These are great doctors and they switch it up. They switch up what they are doing and that makes my heart warm. These are doctors across the board. From ones in independent practices to ones maybe employed by academic medical centers.
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You're amazing. You know what needs to be done and you're not afraid to do it. Now back to our regularly scheduled programming. Today, I am talking with Secretary David Shulkin and Erin Mistry. Here's the first reason why I was interested in taking this interview after their public relations firm contacted me.
We were at the Thinc360 conference in D.C. earlier this summer, and I heard them talking about patients on dialysis dying from infections, which didn't realize how common that was, and it seemed like a nice adjacency to our ongoing CKD work. I also thought this might be an opportunity to learn a little bit more about what's going on with hospital acquired infections and infection control.
Superbugs are hella scary. But one thing I'm just going to point out, and small sidebar here, but listen to the show with Dr. Bruce Rector for more on this. In recent times, I don't think there has been a pharma company who has managed to launch an antibiotic and achieve commercial success. So what can easily wind up happening under the current payment model, Is that instead of just using the new antibiotic to treat resistant cases, there's this perverse incentive to push for the drug's use more broadly because more prescriptions, more money.
But when the new antibiotic is used more broadly, that actually reduces its effectiveness against those resistant infections that it is here to treat. Okay, back to bloodstream infections now, which is the topic of the conversation today. If a patient has a central line infection and then gets sepsis, their chances of readmission within 30 days is almost 99%.
This is not a little cohort. It's not small potatoes we're talking about here either. As Secretary Shulkin says during this interview that follows, if you're going to make a preventative care economic case study. Do it on hospital acquired infections, and most particularly those with central lines that lead to sepsis.
Even with very short time horizons, you can make that case. So that was two reasons for this interview. The third, I've been extremely intrigued by how and why decisions get made in hospitals for whether or not to buy and use potentially expensive new innovative things. Specifically, Innovative New Things, which are used during inpatient goings on, paid for with a DRG.
DRG stands for Diagnostic Resource Group. Medicare, and others a lot of times, pays hospitals a flat sum to care for a patient coming in with heart failure, or sepsis, or needing dialysis, regardless of what services are actually delivered. There are something like $13,000 diagnoses and $5,000 procedures that Medicare pays for with a DRG lump sum payment.
It's up to the hospitals to make sure they buy low and sell high. So, you can see where this is going. A hospital can't go tell Medicare, Hey, we just got some fancy new equipment or a better IV drug, so now we're going to charge more. The DRG is what the DRG is. And if the hospital chooses to spend more on the cost of goods, then the hospital makes less money.
This is kind of along the same lines as Dr. Marty McCary talks about in his book, Unaccountable, the purchasing department or some administrator somewhere is making decisions about what monitors to put in the ORs and they pick the cheap ones that don't have the color contrast that the surgeons need to do a good job.
But the monitors are cheaper and the hospital can't pass on the costs. So from a strictly purchasing perspective, it seems like fiscally solid purchasing, even if doctors are not on board with the decisions and patients have worse outcomes. Seems like somebody over at CMS figured this out and to solve for the purchasers or administrators or whomever who are not willing to lose money by using the new stuff.
Medicare introduced this extra payment opportunity, which we'll get to in this interview today. But the short version is this biotech companies, device companies, others who are innovators can apply to get Medicare to pay a so called NTAP to healthcare delivery organizations who use the new product.
NTAP stands for new technology add on payment. Again, these are additional Medicare payments in the inpatient setting that may be available to those who use certain qualifying new technologies as part of services rendered that are normally part of a DRG. Here's my assessment of the tension between hospitals and plan sponsors, because yeah, when hospitals get paid more for something, that is coming out of somebody's wallet.
If we assume that we're talking about an innovation that actually produces better patient outcomes, I don't know how anyone can say there's a right answer here. If the innovation is expensive, you're going to have payers worried about the money, and fair enough. I can easily hear them saying something like, we're already paying however much to the hospital, and now there's an additional charge that's allowed on top of the DRG.
On the other hand, if I'm a patient, yeah, it would kind of suck to not get the innovation that's going to save my life or whatever, because the payers insist on paying no more than the DRG and the hospital won't pay out of their own pocket. Really enjoyed my conversation today with Secretary David Shulkin.
Secretary Shulkin spent his career running healthcare systems, mostly in the Northeast. A number of years ago, he entered the Obama administration to run the VA healthcare system. In the Trump administration, Dr. Shulkin was in the cabinet as the secretary of the Department of Veterans Affairs. Secretary Shulkin now has a consulting firm and is working with Cormedics.
Erin Mistry, my second guest today, spent her career in health systems and then in biopharma. She now works for Cormedics. My sincere thanks for helping validate a couple of facts in this intro to Scott Haas, Autumn Youngchoo, and Eric Davis from USI. For more on the topic of hospitals getting paid to administer drugs through a patient's medical benefit, listen to the show with Autumn Youngchoo and Eric Davis, link in the show notes.
They cover the ways hospitals sometimes can figure out how to charge plan sponsors and patients 6x the cost of the drug. Acronym alert. CVC, which comes up a couple of times in the interview that follows, stands for central venous catheter, which is something that many dialysis patients have. Second acronym alert.
QIDP stands for qualified infectious disease product. A QIDP qualifies for a special NTAP incentive, specifically for infectious disease products. Link in the show notes to probably way more information than most of you would ever want relative to QIDP qualified infectious disease products. So again, just recapping what an NTAP is, it's a new technology add on payment.
And it's paid for by CMS, who has studied the new technology thing and determined that they actually want hospitals to be using it. So they're willing to pay more than the DRG if a hospital uses this thing because they recognize if they don't pay more, then the hospital won't eat the cost. And just because of all the focus on infectious disease right now, these qualified infectious disease products have some prioritized status over at CMS relative to getting the NTAP designation.
My name is Stacey Richter. This podcast is sponsored by Aventria Health Group.
Erin Mistry and David Shulkin, MD welcome to Relentless Health Value.
[00:10:05] David Shulkin: Thanks for having us. Thanks. Glad to be here.
[00:10:07] Stacey Richter: So to tee up the conversation here, there's Several things I'm looking forward to speaking with you about, but maybe we just start here.
Could you just sum up what's happening with antimicrobial stewardship and to combat antibiotic resistance?
[00:10:25] Erin Mistry: Sure. There's a lot of wind at the back when it comes to antibiotic stewardship, antimicrobial stewardship, AMR resistance programs, things like that, ASP programs that are in the hospitals. There's a lot of policies that have been written and there's a lot of products that have come out to try to alleviate that.
Many of these times, however, the products, I'll speak to that side of it first, the products themselves, there's a lot of downward pricing pressure on the products. The payers typically have products that are cheap. You have an infection problem, you're going to treat with an antibiotic. And there's a lot of, of those inexpensive ones.
You need to fail on them first. But as far as infection prevention, I mean, you, you kind of have the COVID environment that we just came out of. There's been a lot of additional metrics, measures put into place. And then you have the reduction in use of antibiotics because you don't want to use antibiotics too much or you have resistance. We are here. We have an antimicrobial product. It's broad spectrum and it's, it's not an antibiotic, but it prevents infections for catheter related bloodstream infections, which are very severe. I don't think a lot of audience knows how severe bloodstream infections are, but once you get one of those, it's typically a long stay in the hospital.
It's obviously throughout your bloodstream and it, and it causes a lot of longterm complications. And so, we're here to solve that problem with dialysis patients that have CBCs first.
[00:11:50] Stacey Richter: What I'm understanding is we're talking about infections that happen because of catheters. So obviously this is going to be a product which is purchased by the hospital and then used within the course of care.
So this isn't a pharmacy benefit. This is Something that happens, yeah, that would be included in a medical benefit and I would probably say, unless you're getting a J code, that this is also would be included in a typical DRG that a hospital would need to choose to purchase on their own. So, as we all hear about the increasing costs that hospitals are bearing, this would seem to be an additional cost because obviously this is a new product that is costly, I'm just saying for the purposes of asking this question, why should a hospital spend extra money to prevent these HAIs? Why now should they choose to be purchasing product like this?
[00:12:44] Erin Mistry: Well, I can say there's, I mean, David can chime in here whenever you want, but there's a, there's a couple of reasons, right? One, I think very few products come to market that are first in class, not, not first indication for something, a first in class therapy.
And then we also have a qualified infectious disease product. So it's called a QIDP, right? And that's a designation from a regulatory perspective that shows that it does prevent infections and you only can get that designation if you have a product like that. And so there are mechanisms within the system that if you have specific regulatory designations, like a QIDP product or a new class of therapeutics, that you get an extra payment over and above the DRG.
So typically a hospital has to buy a product. They have a prospective DRG payment already set. That dollar amount is the dollar amount that they will get paid. And if they can come under that, they will make money. If they go over that and the patient stays longer in the hospital, then they lose money here.
When new products are introduced that meet certain criteria, that payment is over and above what the DRG is. So they can max out their DRG. and still get an additional payment. And that lasts for several years. That is a mechanism to show that if you use the product during that time, it was create these, these add on payments were created to say, look, we want you to use the product.
You're getting paid money to use the product, use it, show you the total cost of care reduction. And then when that extra payment goes away, the DRG expands. Accordingly, doesn't expand to cover the entire cost of the drug, but typically manufacturers work really hard to alleviate that. We are working really hard to make sure that hospitals get that extra payment and it's enough that makes them want to go after it.
And frankly, they can make money on it.
[00:14:30] Stacey Richter: The QIDP, that's the innovative rider or whatever they tend to call it. Like if you have an innovative product, then you can get paid extra to use it. But what matters is also how, how things get operationalized underneath the financial incentive. What do hospitals need to do to realize the benefit of this?
[00:14:50] David Shulkin: So I go back to really what I know, what I was taught in medical school. You really have a responsibility not to do harm. The issue about nosocomial infections, hospital acquired infections. Is that somebody comes into you for help and they can either end up worse off or even dead because they acquired an infection in your hospital.
So I don't really care about the payment system. I don't care if it costs more. This is a primary obligation that if you enter health care that you should be working on and facing. Now what we do know about what influences human behavior and hospital administrators and doctors. I still believe we're part of the human race.
You often will see change implemented when there are two factors in place. One is it's clinically the right thing to do. And secondly, when there's a financial incentive to at least perform that behavior. And so this is one of those situations where you clearly want to avoid hospital acquired infections.
And when a hospital acquired an infection happens, it's at the financial detriment to the hospital. And when there is new technology and there's a additional payment system, that again, adds even more reason to make sure that those changes are put in place.
[00:16:12] Stacey Richter: So what does antimicrobial stewardship mean to you?
[00:16:15] David Shulkin: Well, antimicrobial stewardship really means addressing what we've known now for 40 or 50 years, that antibiotics are overused. And the wrong antibiotics are often used for the wrong conditions. The most classic is when antibiotics are prescribed for viruses. And so now that we are beginning to have technology that can actually differentiate whether something is a bacteria or virus, we have to begin to start using that technology and prescribing appropriately because this is like any other existential risk to our race, which is that if you don't deal with climate change, it doesn't mean that's not going to happen, that there's not going to be a consequence. And that's the same with anti microbial resistance, that if we continue to ignore this and not use antibiotics appropriately, it's simply a matter of time before The superbugs figure out how to take over and there's going to be lots of unintended consequences from that.
[00:17:20] Erin Mistry: The antibiotics are used from a treatment perspective. I just want to be clear that the product that Cormetics has is a preventative medicine. It's a drug that just sits in the lumens of a catheter in between dialysis sessions. Not during dialysis, it's not used at all. And it's only used in between so that the entire lumen is protected from, uh, from a bloodstream infection and therefore the patient. The other key piece here is that these patients are high unmet medical need patients, right? The number one thing if you're on dialysis, number one or two, depending on who you talk to, is they are afraid to have an infection. They do not want to get an infection.
Because they have to take out the CVC, replace the CVC, they're spending a lot of time in the hospitals and they know the downstream consequences of it. So the point here is, we're not, we're not an antibiotic, we're not treating anything, we're preventing it. The point is, if you're preventing the bloodstream infection to begin with, or any infection, any product, right, is that you don't have to use antibiotics at all.
You don't have to treat the problem, just prevent it.
[00:18:22] Stacey Richter: So that you don't wind up with the problem that all the antibiotics have, which is A, they, they have not been commercially successful. So there's that.
[00:18:30] Erin Mistry: Anytime you have a preventative medicine, anytime, you have to have an economic story around the product or it won't be used.
If you have to have a cost offset story, it goes back to clinical and financial alignment, especially in preventative medication. Now we want to work with health systems and we're working with health systems. to make that argument even stronger to say, look, this is your one of your most vulnerable patient populations.
One in five Medicare dollars is spent here, right? End stage renal disease is part of our patient population. You're going to spend the money. They're going to readmit. They're going to get an infection. If they have a CVC, many, most of them do, and it happens very quickly. So how can you alleviate the cost in the system, but put the patient first, right?
And you're also alleviating their work. And the, and their caregivers, it's, it's a whole way around and that total cost of care model becomes front and center. If we're talking about cost offsets.
[00:19:20] Stacey Richter: So obviously you've got the DRG and then you've got this additional payment. So if a hospital administrator is only cost focused, you're like, okay, well it doesn't cost anything to use this product and I can manage to bill for it.
Maybe I can actually even make money on that because as we all know, they're marking up some of these things. But if I'm talking about cost offsets, you get into that hole again, the thing that nobody likes to talk about, but let's just talk about it. Where are we actually making money when we put heads in beds?
Right? So like if somebody gets an infection and then they wind up getting admitted, now I have a head in a bed. If I prevent that, am I actually downstream managing to lose money here?
[00:19:58] Erin Mistry: I think it's a great point and we've had this conversation with hospitals. These aren't the heads that you want in the beds.
These patients are high medical loss ratio patients. These are the ones that are taking away a lot of money. Typically, if you're going to fill a bed, if you're fee for service, you want to have commercial patients in your beds, not these patients. These patients you want to keep out of the hospital. And frankly, that's what it comes down to.
But I do want to be clear, we're talking about an inpatient component here where, you know, most of these patients, majority of the time, they're treated in the outpatient dialysis centers, Fresenius, DaVita, on chronic dialysis. So they will move. across settings of care, which to me is the most difficult thing we're trying to do here.
How do you engage a system across settings of care when you have a third party dialysis organization that takes care of them over here that is technically not part of the system?
[00:20:49] Stacey Richter: I was actually going to ask you about that because who then is using this product? Would it be a dialysis provider? And then they are actually billing the DRG, or how does this happen here?
[00:21:03] Erin Mistry: The hospital buys the product, the dialysis is delivered by, typically by whoever they contract out their dialysis to. In the inpatient setting, it's, it's one of, usually one of the two big ones, Fresenius, DeVita, does it on the inpatient side, but they also do it at the outpatient clinic. And these patients cannot do home dialysis.
They have to do it in the clinic. If you're on a CVC, you can't do dialysis at home. So it's, it's across settings of care, but it's, it's almost like you have a hospital, they have a payer and you have DaVita and Fresenius or a third party LDL. It's like a three way understanding of the money.
[00:21:35] Stacey Richter: So Secretary Shulkin, if someone came to you with this idea while you were at the VA, what questions would you ask before you would roll it out? And I know obviously that's probably a huge question and it would probably be a gigantic conversation But what would you be primarily concerned about if you were thinking about rolling this out broadly across every visit in the country?
[00:21:57] David Shulkin: Well for me, that's not a hard question. I always ask one thing. Is it the right thing to do for the patient? And if I knew that I had a way of preventing nosocomial infections, then that to me is what you put on your never list. And what you're trying to do is to never have an event that you've caused that can be high in morbidity or mortality.
So that's the primary way that I would make decisions. Now, Some people would say, well, that sounds naive because you have to pay for it. But no, that's not the way I've ever managed. If you can find direct payment for it in the way that Aaron is describing, that makes it easy. But even if you can't, that means that you just need to find alternative ways, other ways of being able to pay for the things that you want to do that are the right thing to do.
So, I think there would be no doubt this should be made available to every patient. For Who has a long term dwelling central catheter because we know that the number of central line caused bacteremias in this country that lead to sepsis is truly an outrageous number. I think that that needs to be done and the payment mechanism needs to be figured out.
And I think that in the inpatient system, you've talked about this QID mechanism. That frankly does help figure that out. But even if it requires a health system to get more creative, I think it's still the right thing to do.
[00:23:34] Erin Mistry: I think health systems before this became a very clear issue, and I'm sure the folks listening to this podcast would agree with this.
These end tap new technology, these add on payments, essentially they're adding on to the DRG. They became, they, they used to be very difficult to pull through, right? It was the coding issue and all these problems, right? Then COVID happened and remdesivir became an NTAP product. And within a quarter, hospitals saw their pharmacy budgets explode very quickly.
And within another quarter, they figured out this has an add on payment. We're going to be able to pull this through. So if we came to market three or four years ago, we would have had an issue. Now we're coming into the market on the heels of many healthcare systems, especially the large ones, which are targets, right?
The large systems being able to execute on this add on payment, they figured out the coding because they had to, right? So many patients that they were treating with this. They had to figure it out and here we are on the heels of that. So we're hoping to leverage some of that knowledge that was gained during that time.
[00:24:36] Stacey Richter: So actually you said NTAP and that's the, the acronym I'm familiar with. What's the difference between an NTAP payment and a QIDP?
[00:24:44] Erin Mistry: There, it's not, but to get an NTAP payment, it's very difficult. So if you were, if you were a biopharma company and you're trying, most NTAP started with devices, new technology, add on payment.
They're very difficult to get because you have to show three things. Substantial clinical benefit, you have to show newness, and you have to meet the pricing thresholds. Because of the regulatory designations of our product, having a QIDP, Qualified Infectious Disease Product, status, and a new molecular entity, CMS said, you have the regulatory designations to do it, you meet the pricing threshold, we priced it, met the pricing threshold.
Have the end tap. And it's one of the first companies and the only one to date that actually has secured reimbursement in a setting of care prior to being approved.
[00:25:29] Stacey Richter: If we're thinking about this now from a payer perspective, because like, obviously this is a new product. It's going to be costly. It's not really if the hospital's billing more.
There's somebody on the other side of that who's the ultimate purchaser who's footing the bill here. So maybe it's CMS. I mean, there are also employers who have patients or members who are on dialysis. So, and there's a lot of employers that listen to this show. What is the economic story for them? Like, because now all of a sudden dialysis is even more expensive.
It's a quarter million dollars as it is, I believe, and now it's even more so.
[00:26:08] Erin Mistry: There's a lot of economics here, right? I think the list price is the list price, what the hospital pays for it. It can be hospital dependent, and that's one of the things that we're willing to work with hospitals on. On the outpatient side, reimbursement has not been secured.
Typically, it's a bundled payment and we have an opportunity for another add on payment and frankly, to be separately paid in general, right? Because we're not just a renal company, we're an infectious disease company. We have many more indications to come, but the economics here are straightforward. It's not just, it's not just financial economics.
It's more mortality data, the number of patients that are dying without a product like this is substantial enough to justify the product.
[00:26:45] David Shulkin: There's also, I think though, in terms of direct economics, once patient develops a central line infection and then sepsis, they not only have an extended hospital stay, which is very costly.
But their chance of readmission in the next 30 days is almost 99%, which is a statistic that I found hard to believe. But these patients do not do well. They come back time and time again, are very high utilizers of resources. And so therefore the very best way, if you're ever going to make a preventative care economic case study.
You'd want to do it on hospital acquired infections, and particularly those with central lines that lead to sepsis. So I think that whether you're a commercial payer, self insured or not, you do want to be supporting technology to prevent illness, particularly something this severe.
[00:27:42] Erin Mistry: We published data on 25,000 patients.
This is, this is outpatient community right based, but 25,000 patients cost the system $2.3 billion. I mean, that is in, it's in a massive amount of money that's being spent in this space. Which is why part of the challenge is look, a very few number of patients are costing you a lot and let's prove it and then let's have a bigger conversation.
[00:28:06] Stacey Richter: So you have talked about shifting the paradigm. Is this kind of what you're, you're talking about relative to shifting the paradigm or if you're talking about shifting the paradigm, shifting from what to what?
[00:28:14] David Shulkin: Well, I, I think when I talk about shifting the paradigm, I'm talking about Really transitioning or ending fee for service medicine and really moving in a much more accelerated way towards value based care.
And value based care, frankly, would eliminate these silos between how you get paid and what the right thing to do for a patient is and integrate it so that if you have technology that can improve outcomes, reduce avoidable costs, that fits very well within the framework instead of having to try to fit the right puzzle piece into a very complex maze in the fee for service system, which we find today.
[00:28:58] Stacey Richter: Thank you both so much for being on Relentless Health Value today.
[00:29:01] Erin Mistry: Thank you so much.
[00:29:02] David Shulkin: Yeah, glad to be here.
[00:29:03] Stacey Richter: So let's talk about going over to our website and typing your email address in the box to get the weekly email about the show that has come out. Sometimes people don't do that because they have subscribed on iTunes or Spotify and or were friends on LinkedIn.
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