Analysis: CMS Should Improve Incentives for Innovative Technology

February 4, 2015 in News

CMS needs to create appropriate incentives for innovative technology as the U.S. moves toward alternative payment goals, according to an analysis published in the journal Health Affairs, FierceHealthIT reports (Hall, FierceHealthIT, 2/3).


Last week, HHS announced an initiative to shift to alternative payment models for Medicare reimbursements, while leveraging IT to track efforts and achieve goals.

Writing in the New England Journal of Medicine, HHS Secretary Sylvia Mathews Burwell outlined the major goals for the Medicare system in the coming years. She wrote that HHS will seek to have:

  • 30% of Medicare payments for hospitals and physicians through alternative payment models, such as accountable care organizations and bundled payments, by the end of 2016;
  • 50% of Medicare payments through alternate payment models by the end of 2018;
  • 85% of Medicare hospital fee-for-service payments tied to quality or value by the end of 2016; and
  • 90% of Medicare hospital fee-for-service payments tied to quality or value by the end of 2018.

However, despite the calls to accelerate health IT use, experts appeared split on whether the industry is ready to leverage health IT in an effective way to spur payment reforms (iHealthBeat, 1/27).

Analysis Details, Findings

For the analysis, researchers compared Medicare’s hospital add-on payment program for innovative technology with technology payment programs in France, Germany and Japan.

The analysis found that CMS approved 19 of 53 applications to Medicare’s payment program between 2001 and 2015. Meanwhile, Medicare between 2002 and 2013 paid hospitals $201.7 million as a result of the program, less than 50% of the amount that Congress had projected and 34% of what CMS had projected.

In addition, researchers found that the amount Medicare paid out under its hospital add-on program was much less than the amount paid under comparable programs in the other examined countries.

The authors wrote, “Compared [with] its peers, Medicare’s program has adopted a narrow approach to paying for new technologies, with a high cost bar for eligibility, a payment rate lower than the full cost of the technology and short defined payment duration.” They added, “Other nations have adopted broader approaches, albeit with lower base payment rates to hospitals and increased payer flexibility to use discretion for specific technologies” (FierceHealthIT, 2/3).

The researchers noted that value-based payment initiatives being considered by the federal government “have not been adjusted for innovations in medical technology” and that “[t]he direct financial incentive created by [such] payments is for providers to avoid or delay the adoption of cost-increasing devices, diagnostics and drugs, regardless of long-term savings or improved clinical outcomes” (FierceHealthIT, 2/3).


The researchers recommended that the U.S. implement more explicit adjustments to value-based payments for innovative technologies to combat incentives to postpone innovations. 

Specifically, they wrote, “The most straightforward method … is for the insurer to retrospectively adjust spending targets … to account for the cost of new technologies that have been approved for new technology add-on payments.” They concluded, “If CMS made such retrospective adjustments, it would not financially penalize hospitals for adopting beneficial innovations” (Hernandez et al., Health Affairs, February 2015).

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