By Jay Ethridge, Chief Executive Officer, IPG

Neurostimulation is one of today's most promising medical therapies. An increasing number of patients with a variety of conditions are experiencing relief through the use of neurostimulation devices. These devices currently account for a relatively small piece of the implantable medical device pie at $3.4 billion annually, but are projected to grow approximately 20 percent a year for the foreseeable future. Many analysts are projecting that neurostimulation spend will eventually surpass annual revenues of the cardiac device market, currently $11 billion annually.

A further sign of growth prospects in the neurostimulation market is the premiums being paid for device developers in acquisitions over the past three years. St. Jude Medical Inc. recently purchased Advanced Neuromodulation Systems for $1.1 billion, while Boston Scientific acquired Advanced Bionics for $720 million.

It's clear that there are many stakeholders - physicians, venture capitalists and patients, to name a few - who are expecting neurostimulation to yield big dividends.

What is behind this growth?

Technological Advances - Today's devices are highly-engineered marvels capable of providing pain relief for patients for five to seven years without replacement. The devices can also be equipped with wireless communication capabilities, enabling easier collection of performance data. As the devices continue to improve in reliability, effectiveness and life-span, they become a more attractive treatment protocol for a variety of additional illnesses.

Growing Indications - Nearly 100 million Americans suffer from some form of brain illness. Neurostimulation devices are increasingly being indicated as treatment for a growing number of these patients who suffer from Parkinson's disease, epilepsy, chronic pain, stroke, migraines and depression. Many of these disorders often do not successfully respond to traditional drug treatments. Neurostimulation offers a site-specific, reversible therapy with a great potential for effectiveness.

Aging population - One-third of the American population will be over the age of 55 by the year 2030. The growth in both the numbers of Americans over 55 and their propensity to live longer than ever before is fostering the double-digit growth in the need for more medical care, and implantable devices.

What does that mean for commercial payors?

As the prevalence of neurostimulation devices increases, so does their impact on the bottom line. Commercial payors need to develop a comprehensive strategy for addressing the management and reimbursement of these devices. And they need to do it soon. With analysts projecting growth of 20 percent or more each year, postponing a device management decision will multiply the magnitude of the problem.

Today, commercial payors are typically managing implantable devices in one of three ways;
1. Discounts Off Billed Charges
2. Invoice Plus Arrangements
3. Diagnosis Related Group (DRG) or Ambulatory Payment Classifications (APC) Case Rates

Discounts off Billed Charges - This is the most challenging reimbursement method for implantable devices as payors have very little insight or control over pricing. Typically, the "discount" rate tends to be much higher than the actual cost of the device. Payors have little to no way to determine exactly how much of a mark-up they are paying.

Invoice Plus - Many payors are pleased if they have been able to implement invoice plus reimbursement with their contracted providers. In a typical arrangement, a hospital or ambulatory surgical center (ASC) provides a copy of the device invoice and the payor reimburses the invoiced amount plus an agreed upon percent mark-up. While this arrangement seems more desirable than discount off charges, it actually suffers from the same pitfalls - significant mark-ups and a lack of transparency regarding the actual cost of the device. Device invoices are notoriously difficult to understand, providing ample opportunity for overpayment.

Case rate - This type of billing arrangement gives the illusion of cutting costs, but has a limited long-term effectiveness. Although it may yield some short-term cost savings, case rate reimbursement programs do not provide payors with device cost or utilization information. Without this data, payors are simply financing the treatments without insight into how to best to appropriately manage this growing trend.

The recent trend toward bundling or global payment structures in the insurance industry can be counterproductive when it comes to handling claims that include an implantable medical device. The devices tend to make up the majority of the reimbursement the provider receives for a given procedure. Inefficiencies in the procurement of the device and payor reimbursement strategies can create scenarios where the payor is paying too much or the provider is not receiving adequate reimbursement. Neither party is happy and the relationship is strained or the procedures are sent to an even higher cost place of service.

Outsourcing or carving out the management of implantable medical devices is a cost-effective strategy that delivers benefits to both the payor and the providers. Working with a company such as IPG that can provide a full-range of implantable device management services will enable payors to better isolate and manage device costs. IPG is able to provide to the consistent pricing, detailed utilization reporting with the goal of helping payors put the most comprehensive and effective contracts in place with the provider community.

Neurostimulation is a promising field, but it also holds the potential for a negative impact on the bottom lines of commercial payors who are not prepared. Taking action now will bring enormous benefits in both the short and long term.