The Economics of Innovation in Upper-limb Prosthetics

The inspiration for this article was a September 2021 special issue of the Canadian Prosthetics and Orthotics Journal titled “Health Economics in Prosthetics and Orthotics” that included 21 articles on topics including advancements in osseointegration, exoskeletons, digital workflow, operations workflow, and research.

[caption id="attachment_244305" align="alignleft" width="342"] cottonbro studio/pexels.com, anna shvets/pexels.com[/caption] While the main focus of the issue was not upper-limb prostheses, the introduction posed a statement to the O&P community that is keenly relevant to the topic of the economics of innovation in upper-limb prostheses: “What you do or what you are working on must eventually meet a) customer needs in a cost-effective manner and/or b) policy needs at the insurer or government level. The success and future of the sector requires a clear understanding of how it ticks economically.” The intention of this article is to provide insight into the challenges innovation brings to manufacturers, payers, prosthetic providers, and users. It will shed light on the economics of innovation in upper-limb prosthetic devices via my direct experience working with new technology and reimbursement within private clinics, federal institutions, manufacturers, and payers. Innovation

Interest has grown over the past 15 years in the upper-limb prosthetic market with the introduction of multiarticulating hands, partial hands, advanced pattern recognition control systems, and active/passive grasping mechanical finger prostheses for the partial hand. Achievements in manufacturing processes and microprocessing have broadened the spectrum of what prosthetic clinics can provide to users, greatly enhancing prosthetic function. Specific to externally powered prosthetic advancements, these advancements are often marketed as bionic, implying to users and clinicians that the innovations have truly captured the complexities of the normal biology of the human arm/hand and even enhanced it, packaging it into a fully functioning upper- limb prosthesis. But these innovations only touch the surface of what the intact human hand and arm can do. The senses of touch, temperature, proprioceptive feedback, unobstructed range of motion, and the complex dexterity of the fingers, hand, wrist, and arm are missing. What is often not realistically considered is the overall usefulness these advancements provide over previous technologies. While advanced technologies and innovation have benefits that may increase the usefulness of a particular upper-limb prosthetic device, not everyone who needs an upper-limb prosthesis will benefit. A patient and/or clinician who is mesmerized by the glamor of bionic prosthesis marketing may be disappointed by the lack of functionality the device actually provides. Proper evaluation of the patient’s candidacy for the new technology is imperative. Payers are becoming savvy to this important foundational requirement and are becoming unwilling to pay for innovation without adequate justification. Even when there is potential benefit from advanced technology, obtaining it may be cost prohibitive. Procuring payment for innovation in upper-limb prostheses is not simple. The basis for providing a new feature’s use over more conventional and affordable technologies cannot be anecdotal and flowered with user testimonials. If payers are going to take justification seriously, providers and manufacturers must substantiate it with relevant and tangible results from valid outcome measures. Continued administration of validated outcome measures must show significant improvement in the user’s functional ability to accomplish the activities of daily living to justify the increased cost of the prosthesis versus less expensive conventional technology. Usefulness and cost of a specific technology are intimately tied to the overall economic value of the prosthesis. Increased Costs, Time, and Service [caption id="attachment_244306" align="alignright" width="373"] Figure 1: Elimination of L-7274 Reduced S-DoF Hand Reimbursement[/caption] Recent advancements in upper-limb innovation have created increased costs in every aspect of the supply chain. Time investment by manufacturers, clinicians, and users multiply the eventual expenses submitted for reimbursement. Historically, clinicians have found that in many cases the existing L-Code system does not describe the features of new technology. Thus, to supply it and make ends meet, we may choose to go down the path of creative billing using combinations of established and unestablished codes. Until recently, when an existing code did not fully describe a new feature, manufacturers would typically recommend the prosthetist submit a combination of codes to the payer, using all or some of the following: the original L-Code for a multiarticulating hand, addition codes for microprocessing, auto grasp (and previously proportional control), and not-otherwise-specified (NOS) codes. In some instances, manufacturers have bypassed all established codes and have used just the NOS codes to describe their technology. Manufacturers originally intended to use NOS codes as a stopgap measure until coding and established reimbursement rates became available for new technology. The combination of codes is usually accompanied by a manufacturer’s suggested retail price (MSRP) that has often resulted in the doubling, tripling, and even quadrupling of the amount traditionally quoted to the payer for myoelectric components. It was generally assumed that the payer would negotiate down. However, by using MSRP as a negotiating tool, we have made the innovation appear more expensive than it is. Noteworthy also is that while the NOS codes have been used as a stopgap measure, and a few inquiries have been made to the Centers for Medicare & Medicaid Services (CMS), there has been no visible formal effort by manufacturers to apply for coding that will accommodate reimbursement for some of the advanced devices and the additional time that it takes to provide them. Clinicians and manufacturers have continued to use work-around methods with inconsistent combination coding for multiarticulating hands for 16 years, which has contributed to the coding quagmire our industry is experiencing. Manufacturers resist new coding out of fear that the assigned reimbursement rate will be too low, and that the application process will be long and costly. L-Codes are designed to cover new products and the time spent to deliver them, not new features on old products and the time spent to deliver the new features. While it seems new addition codes could overcome the limitations of the L-Code, beginning in March 2022 CMS discontinued allowing NOS codes or the addition codes for microprocessors and auto grasp on multiarticulating hands. (They previously retired the addition code for proportion control when microprocessing overtook that function.) They will now only allow payment for the original L-Code assigned to the multiarticulating hand. That’s a big reimbursement reduction and a serious problem for manufacturers and clinicians who spend more time, energy, and money to deliver newer technology than encompassed in the original L-Code. Payment for a prosthetic device in the United States is all-inclusive for the providing prosthetist, including the prosthesis, evaluation time, fitting time, and follow-up for the first 90 days after delivery. The only billable time permitted outside of the all-inclusive payment is 15-minute increments for follow-up care after the initial 90 days. Often, a new technology requires prosthetist’s time and energy to come up to speed on it. The prosthetist will also spend more time with the user. Innovation also requires training time from manufacturers to make sure providers know how to use their products. As the time spent for delivery of new technology increases, the reimbursement for that time is decreasing. Because that payment, for the most part, now comes in one bundle at a fixed rate, manufacturers and the clinicians have to make adjustments to cover costs. Depending on how much of a price cut the manufacturer is willing or able to take, the prosthetist is left with the challenge of stretching whatever margin remains of that insufficient payment out over the span of the delivery time and the first 90 days. There are no reimbursable adjustments allowed for special circumstance or new technology. Outcome Measures and Prosthetic Options Provided The justification necessary for a payer to approve payment for innovation has changed with the CMS decision to disallow the NOS and addition coding. While some payers may still pay an NOS code, any payers who follow CMS guidelines will not. There may be benefit in including upper-limb prosthetic outcome measures in the justification presented to a payer. However, upper-limb prosthetic outcome measure assessments are lacking. [caption id="attachment_244307" align="alignleft" width="430"] Figure 2: Reimbursement Expectations of a Multiarticulating Hand[/caption] Upper-limb pre-prosthetic outcome measures rely primarily upon user’s subjective reporting. Post-prosthetic objective outcome measures are not very effective in predicting the anticipated functional level of an upper-limb user. While measures are available, they don’t adequately demonstrate when the user might progress to a more advanced technology. This is largely because the objective measures have not been developed to reflect the patients’ actual use of the innovation in their daily lives. Lab-oriented grasp and release measures, such as Box and Block, do not always reflect the actual bimanual and unilateral daily activities users encounter. In addition, who conducts the upper-limb outcome measures is critical. Currently, at best, it is a collaboration between the prosthetist, occupational therapist, and the prescribing physician as to when advancement to more complex technology is appropriate. [caption id="attachment_244308" align="alignright" width="415"] Figure 3: CMS Award Versus Manufacturer Expectation[/caption] Once it has been determined that it is time for a patient to move to a more complex technology, then the payer’s rules must be considered. New payer policies stipulate what technology can be allowed or disallowed, determine when it can be provided, and specify a timeframe that it has to be used before another is considered. The chances of getting payer approval for advanced technology that does not have an established L-Code or has not been proven to be significantly effective over conventional technology can be very challenging. L-Codes, Payers, and Economics: What Can We Do Differently? There are numerous payer sources available for the financial coverage of prosthetic devices, including CMS, third-party payers, the Department of Veterans Affairs, and workmen’s compensation providers. These payer sources all have their own set of unique medical coverage policies stipulating what they will consider approving and how much they will pay. CMS’ L-Code system is often utilized as a guide for payment. There is a difference between how upper-limb prosthetic codes are regulated compared to lower-limb prosthetic codes. With lower-limb prosthetic codes, there are local coverage determinations (LCDs) established by CMS that specify which codes and code combinations can be used together, along with set prices that determine the total payment amount for a particular prosthesis. These LCD regulations alert the prosthetic provider to the proper and improper combination of established codes for a complete lower-limb prosthesis. It is a method to manage the total costs of the prosthesis. Specific to upper-limb prostheses and the L-Code system, until March 2022 there had been no formal LCD regulations alerting the prosthetic provider of the proper and improper coding combinations for the delivery of an upper-limb prosthesis. This has been a blessing and a curse. Not knowing what CMS will allow for payment can create delivery delays. CMS, through the establishment of their Pricing Data Analysis and Coding (PDAC) system, recently started to provide Correct Coding bulletins that stipulate which codes can and cannot be utilized with upper-limb multiarticulating hands and partial hands. While CMS has not designated this as a formal LCD, the bulletins have removed codes and stipulated the coding combinations that can be used, which has created challenges in providing these new upper-limb prosthetic technologies to patients. The included graphs showcase examples of real-time economics manufacturers and clinicians face when providing users with a new, unproven multiarticulating hand technology. [caption id="attachment_244309" align="alignleft" width="376"] Figure 4: MSRP Compared to Established Code Reimbursement Levels[/caption] Between 2008 and 2022, the L-Code system experienced an average reimbursement rate increase of 18.3 percent. The single-DoF hand had been the state-of-the-art hand until just after the introduction of the multiarticulating hand. Figure 1 shows that in 2008, a single-DoF gripper hand utilized four established L-Codes and had a CMS average reimbursement rate of $15,849.29. In 2011, when CMS eliminated the L-Code for proportional control (L-7274), the total average reimbursement for a single-DoF hand was reduced by approximately $5,800. By 2022, a single-DoF gripper hand experienced a decrease in reimbursement of 23 percent. The overall CMS average reimbursement for a single-DoF hand now averaged $12,348.33, an overall reduction of $3,500.96 in payment. In July 2007, the first commercially available multiarticulating hand was released at the International Society of Prosthetists and Orthotists conference. Two months prior to the release, the manufacturer submitted an early application to the Healthcare Common Procedure Coding System (HCPCS) Public Meeting Agenda for Orthotics & Prosthetics for a new L-Code. A review of the application determined that the reported sales volume was insufficient to support the request for a revision to the national code set. In accordance with HCPCS coding criteria as published on CMS’ website, there must be sufficient claims activity or volume, as evidenced by three months of marketing activity, so that adding a new code enhances the efficiency of the system and justifies the administrative burden of adding the code. Without a new code, the manufacturer recommended the use of existing L-Codes to describe the multiarticulating hand along with NOS/L-7499 codes to describe and obtain payment for the unique features of their product. The anticipated reimbursement utilizing these L-Code combinations totaled $51,599.29, a 69.3 percent increase over single-DoF hand reimbursement (Figure 2). By 2012, CMS had discontinued the L-7274 proportional control code that reduced the single-DoF hand rate by 32.3 percent (-$5,114.89). The manufacturer’s third attempt for a new code resulted in L-6880 for their multiarticulating hand, providing an official descriptor and reimbursement rate, five years after its commercial release. While it was seen as a victory for the product and the industry to achieve formal coding and reimbursement status, many payers still saw this technology as experimental and investigational, and their medical policies were slow to adopt the technology as an option to their subscribers. The combined rate of the new L-6880 code and associated add-on codes totalled $30,145.91, an 18.6 percent decrease over what the manufacturer was anticipating (Figure 3). By 2022, new features had been added to multiarticulating hands, advancing them beyond the existing L-6880 code. MSRP in some cases were in excess of $70,000, a 50.2 percent markup over established codes (Figure 4). Figure 5 provides an overview of the progression multiarticulating hands have taken since 2007. The results are both eye opening and discouraging. [caption id="attachment_244310" align="alignright" width="387"] Figure 5: MSRP Compared to Established Codes Trends Over Time[/caption] On March 31, 2022, the PDAC Correct Coding document stipulated that L-6880 is the only code that could be used for a multiarticulating hand and further required that manufacturers submit their products for PDAC approval for the code to be used. The document also restricted the use of microprocessor control and auto grasp codes. No restrictions for a cover were mentioned. The average CMS allowable fee in 2022 for L-6880 and a cover is $26,512.12. At last count, there are at least a half dozen multiarticulating hands that have formerly entered the US market, and more are anticipated. All have utilized the L-6880 code and associated addition codes, and some, depending on the payer source, continue to use the NOS codes. Conclusion I don’t have all the answers, but I do see the problem and the need for swift, organized action on multiple fronts if we want to influence our profession’s current path. Prosthetists cannot afford to absorb the increasing costs of these advanced components into the all-inclusive reimbursement rates of the entire prosthesis. They may end up opting for simpler devices that are covered by current L-Codes. Potential prosthetists may rethink their choice to enter the profession. Manufacturers may be reluctant to lower the price of their innovations and lose incentive to create new technology. The American Academy of Orthotists and Prosthetists responded to CMS, voicing the industry’s concerns regarding the PDAC’s Correct Coding documents, and the American Orthotic and Prosthetic Association and the National Association for the Advancement of Orthotics and Prosthetics have formed work groups to address CMS on this issue. I am unaware of other proactive actions that have been taken by manufacturers or their clinical partners. [caption id="attachment_244304" align="alignright" width="300"] VK Studio/stock.adobe.com[/caption] The CMS code application process has been upgraded some since the L-6880 coding was approved, and the platform to apply for coding changes or present issues to CMS, the HCPCS Public Meeting Agenda for Orthotics & Prosthetics Work Group, meets twice per year and now allows presenters to attend virtually. Here are some changes we can make now that I believe can only benefit the current situation: Manufacturers bringing innovation to the market must have a strategic plan in place about how to get properly reimbursed by utilizing established L-Codes. New, standardized outcome measures need to be developed for upper-limb prostheses that demonstrate the usefulness and actual use of new technologies in everyday life. Manufacturers, researchers, therapists, and prosthetists must work together to provide evidence of innovation’s usefulness by consistently and collectively conducting proper outcome measures, and by soliciting CMS for new coding and modifications to existing coding. We all need to take personal responsibility to engage in conversation between manufacturers, clinicians, industry organizations, researchers and end-users regarding this topic and all topics that affect all and any of us in the O&P industry. Karl Lindborg, CPO/LP, is an O&P clinical practice consultant, and upper-limb prosthetic specialist with more than 25 years of O&P experience and ten years of concentrated experience in advanced upper-limb prosthetic technology. He can be contacted at karl@intersectops.com . References Andrysek, J. The economics of innovation in the prosthetic and orthotic industry, Canadian Prosthetics & Orthotics Journal. 2021; Volume 4, Issue 2, No 7 https://doi.org10.33237/cpoj.v4i2.35203 Pricing Data Analysis and Coding (PDAC)F, https://med.noridianmedicare.com/web/jddme/policies/pdac CMS National Coverage Policy, https://www.cms.gov/medicare-coverage-database/view/lcd.aspx?LCDId=35490 Department of Veteran Affairs Rehabilitation and Prosthetic Services, https://www.rehab.va.gov/psas/index.asp Personal experience working in a private clinic, Department of Veteran Affairs, 3 rd Party Payer, Manufacturer, and Catastrophic Care Management

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