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EUND~ OF PATIENT CURE a~IS AN WIIII CLERICAL RESERVE Ruth S. Hornet The majority of academic clinical investigation on human subjects tons place in teadhi~ hospitals, particularly the principal t-~dhj~ hospital s with large graduate medical Vocation program defined as academic ~;~1 centers. Ibe *apes in hcepit~l refit that: have occurred singe the party 1980's, changes in the organization and delivery of services, partiallarly Be grow of How's arxt PPO's and increasel cost containment activities of third-parties, have not yet but could have profound negative effects on the funding of patient care was associate with clinical repro. wile the indict education adjus ~ nt of ~ icare has softened the potential effe ~ s for sc teaching hospitals and some teaching hospitals continue to show respectable surpluses, these surpluses are variable an] may be of short-term duration. Regrettably, There is a paucity of hard data on unfunded direct costs of research Incurred by hospitals and more important, the indirect costs that reflect the increase ~ patient care cost that may result from joint research and patient care activities, not covered In private and public research grants. According to Lave and Anderson, "it is particularly difficult to estimate the incremental patient care costs associated with a.research protocol." m e Ccmmonw~lth Fund Task Force on ~ ademic Health ~ nters (AHC's) has identified clinical development aspects of research as costs folded into the costs of patient care. m e task force's shady attempted to identify the Electra c06tll associated with clinical research In teaching hospitals. me seedy nckes the difficulty in quantifying there costs on a consistent and accurate basis. Of particular concern is the implicit subsidy f~-w~AHC's over and beyond the explicit costs met by grants and contracts. Raced on a sample of five AHC's and 121 research protocols, the findings are that the hospital operating budget subsidized about one third of the costs of clinical research of these proboools. The hospital contribution ranged frail 11 percent to 39 percent.1 The authors nobed that it is not possible to generalize the findings, but concluded that there are substantial costs now being met by the hospitals. iThe Common wealth Fund: Report to the Task Force on Academic Health Centers "The Contribution of Academic Health Centers ~ Clinical Reseat." Urlpubli~ not for public distribution until published. 31

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The factors cat w; ~ 1 affect the ate; ~ id ~ corklike to fund We patient care Adds Assyrian win clinical card are: 1. Charges in support of graduate medic ~tion, both dint costs and the Medicare indict education adjustment. 2. Cost ~ntain~nt prearm frmn third parties to rice hospital admissions ark Its of stay. 3. Selective contracting and disa~unt~ng by PPO's ant How's. 4. Differentials in inpatient and impatient support of education ~ row. We growing tram of rlisaliawing all patient care cats ream to Canaan clinical investigations, whether or not patient care costs would have ~ en i ~ for ~ her treatment modalities (discussed in another paper). Changes in Support of Graduate M~dir=1 Education Recent changes in graduate medical education support from Medicare have places a limit on The increase In direct costs of education and limit the number of years of residency support, to first certification plus one year or five years. Residents as part of their activities participate in clinical activities with salary support provided by the hospital and reimbursed by Medicare. While these minor changes in direct Cost support do not appear to have affected resident participation in clinical investigation, there is continued pressure to constrain an4/or reduce Medicare support. Questions have been raised as to whether patient care funds should be the primary source of support for graduate medical education, based on discussions of who benefits and who should pay. In addition, some teaching hospitals include the salaries of supervisory physicians (faculty) in the direct education cants. Support for these salaries by Medicare has also been questioned. Many faculty who supervise residents perform multiple functions, including clinical investigation. Finally, two reductions have already been made in the M~dirare indirect education adjustment and there is every indication that further reductions are imminent. The Inspector General of the Department of Health and Human Services released a study in July 1988 based on 1986 data, that showed that a sample of 310 touching facilities earned net profits of 18.51 percent, with the indirect adjustment accounting for 37 32

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percent of this surplus.2 Recent anecdotal data suggests that there surpluses Me declining. HI studies indicate that the indirect education factor should be set at 4-5 percent rather than the current 7.7 percent. Until the early 1980's, Medicaid was required to follow the Medicare reimbursement methods. When the Mediocre methods were changed, the states were permitted to select new me~ho~c of hospital reimbursement. Frequently, Medicaid pays below costs and recognition of direct education Costs in variable. Few states provide the "indirect adjustment." Since many large medical education programs and clinical research prCgram6 take place In large public hospitals (state, county and municipal) and in not-for-profit teaching hospitals in inner cities, Medicaid policies are important for support of the patient care activities Irate with clinical research. There are currently no quantifiable data on the impact of changes on funding of patient care costs associated with clinical research. Cost Containment PreasNrrs from Third-Parties to Reduce Hospital Admissions and Lengths of Stay Payment on The basis of diagnostic related groups an4/or cost per case provided incentives to shorten hospital stays. These incentives frequently conflict with the time required for clinical research, setting up tensions between hospital administration financial requirements and research requirements. Furthermore, the extensive use of preadmission certification and professions standards review, reduces admissions with the potential for reducing the number of patients available in hospitals for clinical research. Again, there is not quantifiable data on the effects of preadmission certification and professional standards review on the patient care associated with clinical research or The costs of clinical investigation. Select ive Contracting and Discounting by PPO's and HMD's HMD's and PPO's restrict the choice of providers and seek out lower costs hospitals for most inpatient care services, except for very highly specialized services (Harvard Community Health Plan and a few others excepted). When they do contract with teaching hospitals, they seek discounts. Most of the hospitals with HMO and PPO contracts are non teaching or minor teaching hospitals that do not have extensive research 2U.S. Department of Health and Human Services 'Medicare Indirect Medico Education Payments to Teaching Hospitals," Office of the Inspector General, Office of A but, July 28, 1988. 33

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program;. The principal t~adhi~ hospitals, }cause of Roman factors, have higher Is than non teaching hospitals, estin~ by a Unwed Sony as 126% higher 3 While ~ factors that contrite . to =~ higher mats go well beyond r~ art direct ~ti OCR for page 30
like New York and Massachusetts with ooncentrations of hospitals that engage in large clinical investigation prc grams. As the recent Commonwealth stay noted quantification of the hidden or Indirect c ~ ts, ~ e hospital Collar ~ ti ~ to clinical ~ wit 1 in order to develop viable and defensible options to support patient care casts aCcnriated with clinical research. 35

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CL~CAL IN ID MPNP~ IRE: AID FUND IlIE char OF ~R13 ~ CLINICAL lilVE~lIG~lONS? God D. ~1~,~ OVE~V=W This paper din the relation hip between third party insure and clinic red, and briefly airlines He following: (1) the history of clinical rears furring by third party payers are Aunt nolicv dictions Hat ~l~:re air r~ and devel~nt train, ~ = ~ , enterprise; (2) potential moral, economic & legal consequences of reimbursement denials for clinical research: (3) long-term policy proposals Gnat COU1u preserve Incentives For continued R&D, fulfill insurers' historir~l commitments to finance high quality patient cares and equitably share the costs of clinical research on premising new . . . Ovations. The emerging problem of third party payers' abdication of their legitimate obligations poses serious moral, policy, and legal issues which must be addressed. BAND America's biomedical research productivity is threatened in a variety of ways. In recent years, cutbacks in NIH's budget re guess and Mbdir~re's indirect beaching payments to U.S. hospitals have strained Our sysbem's ability to fund education and development of clinical researchers. Unnecessary Food and Drug Administration (FD\) regulatory hurdles (i.e. "clinic holds for non-safety related reasons") have made it increasingly costly and time consuming for manufa~s to bring new technologies to market. Indeed, the time to market for new pharma~`xti~als has grown fan seven to ten years, and for major new devices, to three years. the impact of these delays has, along with other factors, pushed mc~ima1 product firms to conduct more clinics research overseas where it is "aster and less expensive to recruit patients and researchers. Indeed, virhnnAly every major new drug approved by the FDA in the last four years has relied, at feast in part, on data from foreign site-c C11. Ccmpounding these challenges is an emerging threat created by third-party payers who are abrogating their contractual and statutory obligations to cover costs of patient care for patients involved in clinical research. Faced with pressures to restrain medical spending, public and private payers are increasingly denying payment for patient care costs associated with new, yet premising medical technologies. Recently, health Insurers have denied beneficiary access to investigational uses of new drugs such as Leucocyte Activated Killer 36

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~11S (IAK), reman ~ Hormone, Alpha-Interferan, and Int~rleuk~ *I1-2. A Sulfide of Other therapies such as hands disc surgery, implantable insulin pump, and periEiberal laser ar~ipplasty have suffered a similar fate. he policy ~ ~reat:ens the delicate balance of U.S. bia~iral ear ~ f ~ ire. Mbre ~ tartly, it raises the ~ tre ~ at patients th the personal resources to pay cut-of-pocket will receive new therapies before the less affluent, who can neither pay themselves nor convince their insurers to pay. These policies not only violate the spirit of our nation's commitment to equal ar--C~ to health care, but also the payers' implicit contract to provide high quality med;~1 care to their beneficiaries. Before public and private Insurers embark on policy changes that exacerbate are=== problems, the long-tenm consequences for clinical research and societal equity must be thoroughly examined. A. Clinical Pi FUrxling by Blind Parties Hisbori~a1ly, insurance companies have often reimbursed costs associated with the use of investigational procedures an] products. While n ~ quantifiable, most observers believe these payments account for tens of millions of dollars annually. Payers frequently reimbursed net only the patient care Is associate with the clinical investigations of new products, but also scan of the ire remental costs of research products and protocols. Payment was made for at least too reasons. Fir=, insure clamps describing "oared mc~li~al em" wed often a~nhiguously worded to provide ooverage for ex ~ "r ~ Drily ir ~ red t21" or "essential to the ner~Cc~ry care or treatment t3]," or "necessary for proper treatment [4]." Whenever courts had occasion to rule on the 9 of these words, nasally as a result of an insurer's failure to pay, they invariably held that the insurer was required to pay for new therapies when those therapies (i) were prescribed by the attending physician and (ii) were of some perceived benefit to the patient. Courts, for example, have determined that laetrile treatments [5], experimental treatments for Mongolism [ad, and a controversial treatment for obesity t7], are within the gambit of the "necessary and reasonable" insurance clause. In each case, the court held that the insurer could have limited c average by specifically excluding experiment=] or investigational therapies, or those therapies not approved by the IDA, but had failed to do so [8]. Private insurers have paid for clinical D~SeaDCh also because even where there were contract prohibitions, the claims processing systems were not able to determine whether prescribed care was part of treatment 37

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or an Lncremcot=1 cost of a clinical trial. Furthermore, third party payers were rarely aware that their subscriber has keen enrolled in a clinical research prckoool. Court decisions and the insurers' de facto policies were consistent with equality of patients' ar-=cc to therapies deemed appropriate by the attending physician. As one court stated, "tolnly the treating physician should determine what The appropriate treatment should be for any given condition. Any other standard would involve intolerable second-guaCcing, with every case calling for a crotchety Doctor Gillespie to peer over the shoulder of a SUppOSealy unseasoned Doctor Kildare t91." the largest single public "insurer"--Medicare--statutorily stipulates that the program may not pay for any items or services that are "not reasonable and ne3~c~ry for the diagnosis or treatment of illness or injury, or to improve the functioning of a malformed body member [101." Within the Department of H-a1th and Human Services, this concept historically has meant that investigational therapies are not reimbursed [111. Despite this policy, a former Medicare administrator recently acknowledged that Medicare has not only paid for patient care Ned with promising new therapies, but also those that are purely research expend es. Dr. Carolyn Davis explained that "payment of clinical research costs can occur when fiscal ntermedi~ri~es or peer review organization are unable to separate all clinical research Of. clinical care [121." . Thus, irrespective of contract language, both public and private payers had been unwilling to intervene between the patient and The physician. Moreover, pressures to control total medical costs were modest *tiring the 1960s and yes, where access, not cost was viewed as the p emblem and insurers did not seek to control res arch Outlays. Insurers historically included the costs of clinical research in the premium package. Beneficiaries came to expect that they would be treated with The best available therapies and that this first clam medical care would be covered by health Lnsuranoe. It would certainly come as a shock to most patients if They were to be told that insurance contracts now pay only for second rate medical treatment. B. Recent m ird-Party Policy Changes Regarding Clinical Research Medical inflation during the 1970s led to an extraordinary event in The 1980s, the adoption of The Medicare Prospective Payment System (-PPS). PPS was a catalyst ~ galvanizing insurers to manage hospital expenditures better. Private insurers and Medicaid programs quickly took similar steps, adopting such programs as pre-admission authorization, inpatient length-of-stay review, and increased patient cost sharing. In addition, Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs) were developed to tighten 38

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medical utilization and mPd;~1 prices. Once these macro programs were ~ place, third-party payers began turning their attention to forms of micro-management, such as managing cutpatient care for high-cost chronic diseases, setting fee screens for specific mPdic=1 and surgical procedures, and contracting ~ th specific providers for high-costyhigh-risk surgeries. As part of this micro faces, clinics research support has become a subject of attention. Many Insurers are beginning to enforce contract exclusions for e ~ imental therapies and ciphers have adc~pted even more restrictive o overage limits along the lines suggested by the courts. As detailed in Appendix A, Medicare adopted in 1987 a regulation incorporating its heretofore inarticulated policy regarding reimbursement for clinical research. m e program now attempts explicitly to prohibit rend Basement for any service "related to" investigational drugs, products or procedures. In 1986, the national Blue Cross and Blue Shield Association also adopted more stringent guidelines as outlined in Appendix B. In general, the Blues do not recognize as eligible for ins= ance payment any investigative therapy that has not unreceived final approval by the appropriate regulatory bo~y.t' Many commercial Insurers and HMDs have also followed suit. me Harvard Community Health Plan and Group Health Cooperation of Puget Sound, for example, do not cover even approved drugs when used for non-FD~ approved indications t131. In focusing on clinical research expenditures, insurers have pursued short-tenm budgetary savings to the possible exclusion of other goals like enrollee satisfaction, quality of care, and long-tenm social equity. mese impacts deserve closer examination. C. Implications of Clinical Research Restrictions Many third party insurers maintain that the benefits of clinical research accrue to the pro duet manufac ~ and future patients, not necessarily to the patient to whom the investigational therapy is provided. Factually, this view is simply inaccurate. Indeed, nest nP~;cal innovations are clinically tested (and provided to insured patients), only hen they already Thaw promise. For ale. bone ~ ~ ~ ~ ~ . . . marrow ~ran~lan~s are orgy usea here They are et to save lives. Further, new prosthetic implant designs are typically used as alternatives to older models, and next generation antibiotics are given to patients with serious hospit~l-induced infections that are not treatable with existing drugs. In these cases, the use of experimental treatments may mean the difference between life and death for the patient. Mare fundamentally, these new restrictions may place doctors and hospitals in moral, ethical and legal dilemmas. Non-payment could severely limit a doctor's ability to prescribe for patients. Cost 39 ..

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issues would inappropriately have to be considered in a medical decision especially where a particularly expensive experimental procedure is contemplated. If the insurer declines payment becalms= of the experimental nature of the procedure, and it is not utilized, the lemma is curious if the patient's condition suffers as a result. The implications ar ~ ing from the federal government's attempted ado pkion of these restrictions are even more disturbing. Congress, when it passed the Medicare bill, :~-ifi~=lly prohibited "any Fecle~1 officer or employee to exercise any supervision or Carol over We practice of porcine or We mimer In With nmli~1 services are pr~ricJed... [141. A ~ani~1 definition of what is "investigations E151" and, hence, nck eligible for payment may inappropriately run afoul of the confessional exhale -tucked above and mav be ~nsis'cent with the underlying Medicare legislation. A blared prohibition against ~ _ my. _~ e ~ ma ~ ~ 11.~- or any experlmenr~l or ~nvesclgarlve orug or procedure, no matter how beneficial, certainly cculd be considered an unauthorized intrusion into the physician's ma practice. Nat only would this new "cost reduction strategy" greatly impact the practice of medicine, it could not be explained to patients and would lead to patient dissatisfaction with ins firers and the heath care system in general. A patient receiving treatment for an ailment expects the doctor to use all the available tools and the insurer co cover the costs of treats ant. ~ nt to this cost reduction strategy, new and possibly lifesaving innovations are placed out of reach of many patients, contrary to their expectations and the long-standin~ practice. Treatment on the cutting edge of medical technology will fast . . . . . . . . . A two-tier become available only to those with the ability to pay. medical delivery system will almost assuredly result with the vast majority of working men and women unable to receive the most up-to-date medical treatment. Naturally, there will always be a need for exceptions. For example, who should pay for potentially costly lifesaving interventions for previously untreatable cancers? In this case, the insurer and researcher should engage in timely negotiations regarding the insurer's contribution (for example, payments could be predicates on a negotiated probability of a successful oubcome) D. CONCESSION . Given the broad spectrum of what constitutes research, as well as the range of differences (positive and negative) between the expec teed costs of treating patients with experiment=] protocols vs. main stream therapy, precise rules will require more detailed ctisa~ssion. Ne~rerthel~=, We following principles Should form We basis for an immediate policy debate: 40

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o R~blic and private insures Obligation to Otiose for all appropriate patient care ~ d be explicitly enfor~l, r~3ardl~= of any ~nitant involven~ of the patient in a clinic trial. Historically, insures have implicitly sporty part of the cot of clinical r~ as a ~q~ri~ion both to the :ppec:ific plan benefits as well as to society's invesbment in its future; this support should be maintained, and be made explicit. O Sponsoring research organizations have a ~nsib;1 ity to cover the Is of basic ~arch, ye Hal AL of new Ire pr~cts or services, and the incremental prokoool-~riven C06~5 (e.g., lab tests, data collection, etc.) necessitated by their research. O The principle of "c~ortlmit~r cost" (or the cost which they w ~ d have paid otherwise for patient care), should be the rule when patients are involved An clinical research. Insurers should expect to pay the opportunity costs for therapies which, although investigational, represent the most favorable treatment alternative considered by the patient's physician. In the case of an investigational orthopedic joint appliance, for example, insurers would pay all hospitalization, rehabilitation, and follow-up care the patient would have received for an alternative prosthesis. However, the incremental cost of the new prosthesis over the alternative may not be covered. For an enhanced investigational antibiotic for noEocorial infections, the insurer could likewise pay all standard treatment combs associated with pro Aiding an effective current generation product. The incremental costs, if any, of the new generation drug would be the responsibility of the researchers. It ~ apparent that a major national delete on the issue of th~rd-party funding for medical care is warranted. While the short-term risk to America's research infrastructure is limited by the relatively unsophisticated nature of claims processing, the uncertainty created for research is disturbing. This is particularly true since the ultimate financial benefit to payers would be small, if there are any at all. Short-sighted payer approaches abdicating patient care costs related to investigational new therapies make poor public policy and could Pricusly harm domestic innovation. abbe importantly, patients may be at great risk of losing access to hip q~li~r care and be forced to obtain innovative treatments based on 41

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ability to pay. -this eventuality would not be in the i~ts of either Piety or me payer unity, and also raises Trial estions abut statutory and contractual interpretation, as well as cor~ressianal intent. ltree cam; of action are pry: 2. State ~ rotators Id Irene and stop the w~rawal of refit for me essential Is of m~ica~ care, ~a~.,c of ~ iTnrolvement of a clinical i~estiga~r. legislators Child reconfirm their Lenient to an= for appropriate m - Pal care for all. regal action dhalld be explore on an individual or clan= }basis, if r~r' to prevent this Lesion of ~nsibility. l 42

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Cons 1985) . I. Tonal Fornication, Fax Office of New ~ Evaluation. She v. Travelers ~ i, 383 N.W. 2d 259 (Mi~h. 3. in v. Cornetist General Life ~ (:o., 565 F. Sups. 434, 450 (N.D. Cal. 1983). 4. Mint Sinai Hospital v. Zorek, 271 N.Y.S. 2d 1012 5. Shaman v. Travelers ~ Cry, supra. (Cir. Ct. 1966). 6. Trio v. Marina ~ysiciarm' Service, 555 p. 2d. 998 Mbnt. 1976. 7. runt Sinai Hospital v. Zorek, supra. 8. At lot one insllra~ Any, Travelers ~ Agony' took the position that "a genera:[ exclusion fc~ drugs and treatments not approved by the Food and Drug A~ini~tion wood be undesirable since it would preclude coverage for rug:; and treatments ~ the emit till stage which are krx~n to be effective." Sh~nak~, supra at FN2. 9. Aunt Sinai Hospital: v. Zonk, supra. 10. 42 U. S . C. - 1395y (a) (1) (A) . 11. No cat has directly a~r~ the interpretation of "reasonable and Rosary" ~ this context. Heroine, it Mains to be seen Nether the It's interpretation is pricer. For a discussion in the Muddied content, For Petrels V. Preisser, 623 F.2d 546 (8ff~ Cir. 1980~; but ~ Ruth v. Eon, 625 F. 2d 1150 (11~ Cir. 1980~. 12. Davis, C.K., The impact of ~rtive-Payment on Clinical ~sear=, SPA, 1985. 253~5~; P 686-7, February 1, 1985. 13. Personal Fornication, Harvard Unity Health Plan and Heal1:h Coloration of Puget Sa=. 14 . 42 U. S. C. - 1395. 15. See ~ix. 43

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AE~ND1:X CCWERAGE AND LIMITATIONS* General Exclusions From Coverage 3300. General Exclusions No payment can be made under either the hospital insurance or supplementary medical insurance pro grams for certain items and services. , _ Resulting from war (S2315) ; Personal comfort (S2318); Routine services and appliances ( S2320) ; Supportive devices for feet (S2323) ; Custodial care (S2326) ; Cosmetic surgery (S2329) ; Charges by immediate relatives or members of household (S2332) ; Dented services (S2336); Paid or ~t~ to be paid urger worker's Cation (S2370); Norlphysician ser~ri~= provided to a hospital inpatient high were not provided directly or arranged for ~ the hoSpit= (S2390). J. R. L. M. N. A. Not reasonable and nectary (S2303); B. No legal Obligation to pay for or provide services (S2306); C. Ebonized or paid for by g~rmTnrent inst~talities (S2309) D. Not provided within United Stat (S2312); E. r. G. H. I. ; 3300.1 Senri~ Related to and Respired as a Result of Senri~ high Are not covered Urger Medicare A. Medical and hospital services are sometimes rag to treat a condition that arises as a result of service= which are not covered because they are det~i~ to be not reasonable and nearer or because hey are excluded fry verage for other reasons. Service= "related to" nonc~vered senri~c (e.g. cosmetic surgery, noncavered organ transplants, noncc~vered artificial organ implants, etc.), *Reprinted fawn Vie Medical Carri~r's M~ntm1 (Hillel Core Finarx~ing Administration), Part III, Claims Pus, Voltage 1, beginning page 2300. 44

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incited serving read ~ foul-up care and duplications of r~rx~ove~ senri~ bitt ~ treatment durir~ a ho~pit=1 day In Rich the r~orxx~ver~ service was perform, are red covered serving urn lSedicare. Services "mat relate to" Hoover services are Alar user Medicare. ~ AND [INS B. Identify which services are related to noncovere] services and which are not. Following are some examples of services "related to" and "not related to" noncovered services while the beneficiary is an inpatient: 1. A beneficiary was hospitalized for a noncovered service and broke a leg while On the hospital. Services related to care of the broken leg Curing this stay is a clear cut example of "not relater to services and are covered under Medicare. 2. ~ ~ w w A beneficiary was admitted to The hospital for cowered services, but curing the course of hospitalization became a candidate for a noncovered transplant or implant and actually received the transplant or implant curing that hospital stay. When the original admission was entirely unrelated to the diagnosis that led to a recommendation for a noncovered transplant or implant, the servitor related to the admitting condition would be covered. 3. A beneficiary was admitted to the hospital for covered services related to a condition which ultimately led to identification of a need for transplant and receipt of a transplant during the same hospital stay. If, on the basis of the nature of the services and a comparison of the date they are received with the date on which the beneficiary is identified as a transplant candidate, the services could reasonably be attributed to preparation for the noncavered transplant, the services would be "related to" nonoovered services and would also be noncavered. C. After a beneficiary has been discharged f ~ n the hospital stay in which he received nonoovered service=, medical and hospital services required to treat a condition or complication that arises as a result of the prior noncavered services may be covered when they are reasonable and neneC=~ry ~ all other respects. Emus, coverage could be provided for subagent inpatient stays or outpatient treatment ordinarily covered by Medicare, even if file need for treatment Enrobe because of a previous nor~vered procure. Some examples of services that may be fat to be covered under this policy are the reversal of intestinal bypass surgery for desist repair of complications freon ~ar~s~1 surgery or from paretic surgery, removal of a non~vered blamer stimulator, or treatment of any infection at the surgical site of a norx~vered transplant that Burred following discharge from He hospital . 45

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However, any sureent serving that are an Ingram part of a northern service; i.e., an exertion of a periodic segment of a r~or~verect service or followup care associate with it, Chid be denim. Ibus, who a patient undergoes ~tic surgery and Be treatment region calls for a shies of Maturative visits to the surgeon for evaluating the patient's paresis, these visits Phalli be denied. (Son HCFA Pub. 13-3, S3637.15 and HCFA Pub. 10, S41518 for billing PI ) 3303. SERVICE NOT RUE AND N~aRY It; and services pith are not reasonable ark] n~C=~ty for the diagnosis or treatment of ills - as or injury, or to improve the functioning of a malformed body n ~ ; e.g., payment ca ~ t be maple for The rental of a special hospital bed to be need by the patient in his home unless it was a reasonable and necessary part of the patient's treatment. See also S2328. 2303.1 Devises Not Approved by FDA M~di~1 devices which have not been approved for marketing by the Food and Drug Administration (FD\) are considered investigational by Medicare and are not reasonable and necessary for the diagnosis or treatment of illness or injury, or to improve the functioning of a malformed body member. Program payment, therefore, may net be made for me~;oa~ procedures or services performed using devices which have not been approved for marketing by the FD\. 2306 NO CAL OnT.T~ TO PAY FOR OR ELUDE SE:EO7I~ Program payment may not be made for items or servi ~ which neither the beneficiary nor any other person or organization has a legal obligation to pay for or provide. This exclusion applies when items and services are furnished gratuitously without regard to the beneficiary's ability to pay and without expectation of payment frog any source, such as free x-rays or immunizations provided by hearth organizations. However, Medicare reimbursement is not precluded merely because a physician or supplier waives the charges in the case of a particular patient or a group or class of patients, as the waiver of charges for some patients does not impair the right to charge others, including Medicare patients. The determinative factor in applying this exclusion is the reason the particular individual is not charged. The following sections illustrate the applic~hility of this exclusion to various situations involving services other than those paid for directly or indirectly by a governmental entity. (For a discussion of the latter, see S2308~. 46

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A. Indigence. mis exclusion does rot apply men item arm serving me furnished an indigent individual wi~axc charge because of his inability to pay, if me physician or s~lier bills other patients to the extent that they are able to pay. B. Physician or S~lier Bills Only Id Patients Sore physicians and suppliers waive their charges for individuals of limited means, but they also emit to be paid if me patient has which cored the items or serving they furnish. ~ ~ ~ ~ ~ ~ . In such a situation' grouse it as C1~' mat a patent wag De cage if it, a leg Obligation to pay exists and benefits are payable for services rendered to patients with medical insurance if the Physician or supplier amt~rarily b; 1 is all insured patients not just Moliere patients even though nonin~ patients are not charged. Individuals with conditions which are the subject of a ~ ea ~ project may receive treatment financed by a private research foundation. The foundation may establish its own clinic to study certain diseases or it may make grants to various other organizations. In most cases, the patient is not expected to pay for his treatment out-of-pocket, but if he has insurance, the parties expect that the insurer will pay for the services. In this situation, a legal Obligation is considered to exist in the case of a Medicare patient even though other patients may not have insurance and are not charged. C. Medicare Patient Has Other Health Insurance . ~ Excel as provided on ss3335~-., S335'f., and 3340ff., payment is not preceded urger Medicare even thigh the patient is cover by another health ~nsurar~e plan or program which is ciblig;at" to provide or pay for the same serving. Ihis plan may be the type With pays money toward the sect. of the serve- such as a health insure ~ e policy, or it may be the type which organizes and maintains its own facilities and professional staff. Examples of this latter type are employer and union sponsored plans which furnish services to special groups of employees or retirees or to union members and group practice prepayment plans. The exceptions to this rule are services covered by automc bile medico or no-fault insurance (S3338ff.), services rendered during a specified period of up to 12 months to individuals entitled solely on the basis of end stage renal disease who are insured under an filcher group health plan (S335ff. ), services rendered employed individuals age 65 or older. 47

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THE FUNDING OF CLINICAL INVESTIGATION IN THE ~ IS M~tc hell T. RabRin Under virtually any definition of clinical investigation fall a variety of patient care encounters ranging from an intervention superimposed on the activities of an otherwise clinically ner~cc~ry ambulatory visit or inpatient a~m;~cion-the nature of which is essentially unchanged by the experimental pa ~ to ambulatory or inpatient enanunters -=c=ntially solely or primarily for the purpose of carrying out the experiment. Hesitancy of third-party payers to pay the costs of these enanurers is understandable they meat have concerns over whether they are paying cut excel= dollars for encounters entirely for the purpose of the experiment or, even where some diagnostic or therapeutic effort useful to the patient is carried out, whether they are paying for such Wed episodes taking place with greater frequency than sight otherwise be useful or at greater cost than appropriate for the needed clinical encounter alone. In the case of the federal government and Medicare, patients may be hospitalized for reasons acceptable to Medicare, but became e the hospital payment is predicated on admissions averaging a standard length of stay, experimental efforts which m~qht be instituted daring such admission (and might not have been anticipated prior to admission) may I-~d to dire economic consequences for the hospital should they require additional length of stay, since payment for the added days will not follow. Because other payers are maying tc ward similar modes of payment, this concern goes beyond that of the Medicare patient. One approach which sight be made to Medicare would be to call for a new DRG which represented admissions or added days, etc., for clinical investigation. Obvicusly, this could not be an unlimited Opportunity for the hcepit~l. ~ Restrictions could be placed not only on how that DRG was assigned - the limits could be placed on the nature of the hcepit=1 that could use that DRG, the nature of the approval process both inside and beyond the institution that would sanction such an admission, etc., the permissible extent of any such application and the overall total of such days and offer r~r~ allowed, for eagle, In relation to be total inpatient days of the institution or to offer c~arac~ristics. A ~hani~u of this sort wc~c3 allay Medicare to recoc~nize the ~ ~ _ _ Aim___ e ~ ~ ~ ~ ___ ~ ~ ~ ~ ~ ~ ~ ~ importance of clinical investigation, to support that at: of it not typically supports by specific ~ rch grants nor by Media re today, yes one mechanism coula 1Imlr overall noun One average cost to one payer per experimental admission an] the total of such costs for clinical investigation the payer would provide any one hospital. Such an arrangement could then allow flexibility to the individual hospital, through internal allocation and monitoring by its own research committee an] administration, so that longer hospital stays for clinical 48

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imrestigati~ could be tolerated, Woo Alley aviate, for exile, albeit at the Manse perhaps, of ally for ~C~;~cior~; that year for ~ of clinic my,. A secular and prays Tore ideal at amid be made by NIH itself with .~lected hospitals. After all, We Bia~ical Wry S ~ rt Grant r ~ nizes the ne ~ for flexible institutionally-all^~d funds in amounts related to the institutions volume of NIH-supported research. Could not a similar program be developed specifically for clinical costs not otherwise covered, again in relation to some functional measure of clinical research activity and giving the individual institution the opportunity for Recision making, documentation and CO11LED1 with respect to the specific allocation of these funds within their general prescribed use? Similar arguments could be ~ de for private insurers, since the costs of RED to improve a product are standard ~ virtually all other business transaction s. However, because insurers are working to dicindsh their payout at present, it is unlikely that Blue Cross, commercial insurers or HMD's would be responsive. Hence the creation on an NIH-h~ program would be more useful and, in the Tact analysis, more appropriate since the determination of which institutions ~ ght warrant this support for clinical investigation support could best be done by NIH rather Can the usual third-p~ty payers, including Medicare. 49