Reimbursement Issues

Are these reimbursement issues a real problem or not for NuVasive?

http://online.wsj.com/article/BT-CO-20091120-710596.html

 

Nuva reps better start pushing those nice cervical plates, and if you have stock you better dump it!

 

Likely most of the action under this topic will be Nuva-bashing; but I digress back to the question momentarily...

Taking into count the payment and implant lifecycles, and how different they are, there is likely little to no impact in the long term on XLIF. Even if every insurance company in the US decided to consider the technology investigational; there is no way to differentiate between an XLIF and an ALIF. And aside from the approach, this is rightfully so.

Be it an anterior retroparitoneal approach, or a lateral transpsoas approach; the end result is an interbody device in the anterior spinal column. The hospital pays nuvasive for an XLIF, the hospital bills for and is reimbursed for an ALIF. And, effectively, the patient has received an ALIF.... minus of course the potential adhesion issues, large incision, and dangers associated with mobilizing the great vessells.

And for the record, I am a competitor of XLIF... not a Nuva rep. I do, however, embrace the advancement in techonology that clearly has the potential to benefit patient outcomes greatly.

 

I cant understand why such a simple and straight forward thing is not being understood by the financial markets. Why are analysts twisting the story and making it murkier? Why is the stock being punished? Am I missing something big?

 

I have to respectfully disagree with you about the ALIF and XLIF being essentially the same thing. By the reasoning you put forth in your post, couldn't a TLIF then also be considered an ALIF because you are placing a device to give anterior column support??

For the record, I am a Danek rep with 9 years in the game. However, I take no pleasure in seeing XLIF and it's reimbursement get publicly pummeled in the press because as I go out and try to convert XLIF users to DLIF, the reimbursement issue will affect any device that will be placed through a lateral approach.

 

The issue is not simply the reimbursement piece but that fact that over 80% of revenue that Nuvasive is pulling in is from their XLIF procedure. If the availability of the procedure is compromised by non-coverage from the insurance companies, that is a big worry for the long term viability of a Nuvasive. This kind of news is going to have a seriously negative impact on their stock.

 

Thanks for your reply. but why would there be non-coverage? XLIF is an approach/brand, the final result is spinal fusion and there have been more than 10`000 procedures performed. Moreover, the added benefits of this procedure are more or less accepted (proven)

 

This issue has nothing to do with hospital reimbursement. It has everything to do with surgeons being paid for doing an XLIF. Right now guys are coding it as an ALIF, some dirtbags use a code that pays much higher (extracavitary approach) and insurance companies have been gladly paying the claims without blinking. Because of the current healthcare debate, insurance companies are being much more discriminating in what they accept as a reimbursable procedure. Many of the companies (Cigna, Aetna, Anthem...) have arbitrary criteria for what they will cover, like 2 or 5 year prospective, double blind, peer reviewed outcomes. If the procedure doesn't have that kind of study, it will be considered experimental, and likely recieve a new category 3 tracking code...the kiss of death. Once that happens, you can bet that all insurance companies will decline to cover the procedure. What will happen before that, insurance companies will just ask Dr.'s what specific operation they are performing when they submit the ALIF code. If it is an XLIF, they won't get paid, or will have to ask for a peer review, and probably appeal a denial. This will require all of the lateral approach companies uniting their ample resources, and lobbying the jackholes at NASS to intervene and ramrod an new Class 1 code through to avoid a collapse in the adoption of lateral access surgery. Sorry for the bad news. NUVA stock is either a sell now, or hold for the loooooong term. I hope they have been saving their pennies, because the cash cow has been sent to slaughter.

 

Thank you, what you say makes perfect sense. Please help me with my questions.

*Does Nuvasive have prospective, double blind study data on XLIF? Their CEO said during a call that they dont need more data/evidence. If I were a patient, I would not like to be randomized against ALIF as the benefits of XLIF seem obvious.
*Do you think NASS will intervene in favor of lateral approaches. And if yes, how much time would that take to get Class 1 code?
*Isn't ALIF also considered experimental by the same insurance companies?

many thanks,

 

You ask great questions...randomization, and double blind studies with spine surgeries would be very difficult. The best you could probably do with regard to blindness is a single blind study. That way the person compiling the data would not know whether a lateral or other approach was used. I was using the "gold standard" study criteria as an example of what an insurance company might want. I am not sure what they are asking for in this case. Usually 5 year results are part of the picture though.

NASS may or may not try to issue a specific code for lateral approaches...since the big companies, with the best paid lobbyists, all have a lateral approach, my guess is NASS will do whatever they need to not to ruffle feathers. That may be issuing a Cat 1 code, and stating that they have seen enough data to validate the approach, or it may be that they hold TLIF and ALIF so dear that they make these companies prove that lateral surgery is a valid option. I do not know what they are thinking, but I do know that they are politically motivated.

ALIF's have been around for a long time, and at worst, there are plenty of retrospective studies with much longer lookbacks for results. It is sort of a moot point, though, since ALIF already has a Cat 1 code. As does PLIF/TLIF. In reality, if a surgeon believes that he can defend that a lateral approach is an ALIF, then he is entitled to use that code. The language, I believe, gives him that lattitude. The question becomes: "Is it worth the hassle of defending every XLIF he does?" The answer is not that simple, it means he must intentionally make sure that his op notes describe the approach so that it matches the definition of an ALIF, and that he is willing to invest the time and resources into fighting the battle whether that is an appeal or a medical review. Let's face it, they want to make the insurance administration issue as simple as possible for their staff and themselves. They worry about being accused of fraud, and if they are, it costs big money to make that accusation go away.

The insurance companies already know which surgeons are doing XLIF, so it won't be a big deal for them to start asking "Is this an XLIF?" when they get a claim, or a request for preauthorization.

I only know enough about the details to speculate, and do not claim to be an expert. I don't know if it is really time to hit the panic button, but at the same time, I would not just dismiss this as a non-issue. Time will tell how this plays out. If I were a betting man, I would bet that NASS does not want to piss-off Medtronic (DLIF), Synthes (Oracle), and the new sweetheart of the spine world NuVasive (XLIF). They spend a lot of money to make NASS happy, and the surgeon members of NASS make a lot of money doing these procedures. I am not sure of the names of the products, but I know DePuy, Globus, Alphatec, and others have or are working on a version of a lateral approach. I am guessing that it is here to stay.

If NASS does require a Cat 3 code, it could take 18 months to a year to sort it out and receive a Cat 1 code. That doesn't mean that the companies can't invest in the resources needed to sway the individual insurance companies to pay for these operations. It will just take a little time, and a fair amount of money. Since most of the big players have the same interest, it may not be a big deal though...maybe a few months to get it done. Maybe longer.

The only certainty, is that the situation right now is uncertain. Sorry I can't help more with specifics, it is a convoluted situation with many variables. I am sure I am not considering pertinent elements to the conversation as well.

 

Thank you so much, I think all that you say makes sense, in the short term the analysts have succeeded in crating some uncertainty around Nuvasive.

I tend to believe Alexis Lukianov who has significant experience in spine. He mentioned during the call there is not going to be any impact on the guidance for this quarter and next year. If you look at their careers page, the number for sales vacancies in US is huge. They have not yet scratched Europe and Japan. The opportunities for this company are massive.

I think this issue will be sorted out quicker than we anticipate. Lets wait and see.

PS.

 

What do you expect Lukianov to say? That Nuva is going into the toilet and that we should all run screaming right now?

Look, this is similar to an issue that DePuy had a few years back with the Charite ADR an that Medtronic/Synthes are having right now with their cervical ADR. Non coverage decisions based upon their belief that it is "investigational" from insurers is a huge deal.

I'm not saying that Nuvasive is gonna crash and burn or anything like that but I would be very surprised if this issue is sorted out quickly. Nuva needs to diversify it's portfolio or there could be some very long term problems on the horizon for their shareholders.

 

I am a bit stuck with NuVasive and have lost too much money already as I bought it at a high price. I can only hope that they beat analyst estimates for this quarter and raise guidance for 2010. That's the quickest way for the stock to come back to normal levels in the short term. If this does not happen, it would be a disaster.

I tend to believe in the promising future of Nuvasive as they are growing at 40% compared to 20% growth in MIS procedures and 10% for all spine (they are in a great market) Also MIS constitute less than 20% of all spine procedures and the trend seem to be gaining good momentum. Nuvasive is doubling its sales force in the US as it is wrestling significant market share from the big four. Medtronic spine business in the US grew 2% compared to the market growth of 10% which means they are loosing. Nuvasive is also a very good acquisition target.

I feel that the coverage issue will get resolved because there is very little logic in the stand of the insurance companies. They are asking for evidence after more than 10'000 XLIF procedures have been successfully performed... Unlike cardiology, orthopeadics in general has few high quality studies... They are going to greatly annoy the patient communities, surgeons, surgeon associations and the hospital management by denying coverage of such a promising procedure.

Another thing that I fail to understand is that XLIF should be costing the insurers less than a ALIF or PLIF procedure as it does not require access surgeon, less blood loss, quick recovery etc (I should be missing some thing here... I live in Europe and do not fully understand the US reimbursement)

Nuvasive definitely did a poor communication job with insurers. Its difficult to believe that such an experienced management team could not see this coming. And yes, they should invest more in good clinical evidence in the interest of the patients.

thanks for your thoughts and contributing to this discussion.

PS

 

Is anyone aware of an effective method of appeal, if your surgeon has already coded it as XLIF and denial sent?

 

There is no XLIF code. It is usually coded as an ALIF: CPT 22558. If the surgeon is a dirtball and is trying to milk the system, they will code for an ALIF, and add the extracavitary approach code: CPT 22532-22534. If they used the extracavitary code, forget any appeal. It is considered borderline fraudulent by some in the business. Otherwise, the process is simple for the ALIF code. He may need to draft a letter of medical necessity, and resubmit. Maybe it will require a peer review. He can possible resubmit with an unspecified code (can't remember the CPT) which would typically automatically trigger a peer review.

 

Until now no surgeon has been denied coverage for XLIF

 

Actually, there have been several insurance reimbursement issues for XLIF. Also, Lukianov isn't fooling anybody when he says "Surgeons are saying XLIF in their notes when they should be saying ALIF". If XLIF is performed, XLIF should be stated, otherwise it's fraud. Lukianov should be "Dancing with the Stars", because he sure knows how to side step an issue.

 

Concerning post #17... I should have mentioned the medicolegal issues. Suppose there are complications, for whatever reason, and the patient expires. The plaintiff's attorney is going to have a field day.

 

Couldn't the surgeon say: "retroperitoneal approach to the intervertebral space?" While this would be incomplete, it would be accurate. A more accurate and complete statement might be: "transpsoas, retroperitoneal approach to the intervertebral space." The first one probably isn't fraud, but attorney's might argue that the intent is to fool the insurer, and that makes it fraud. This situation will surely bring-up some ethical issues. It really comes down to what a surgeon believes they can defend legally, weighed against what is best for the patient. There are lot's of ways to spin this.

 

From a reimbursement expert: You cant go piggybacking on another procedure's CPT code. If Nuvasive had done its due diligence in the first place and gome through the coding system's process, they wouldnt be in this position now. Ex-Medtronic leadership arrogance is rearing its head with this issue.

Is going through the coding process fun and easy? No. But its the right process and if you ignore it you will eventaully get burned. Besides the non-coverage policies and lower stock price, Nuvasive can expect the DOJ to be working them over and looking for a nice fine for improper reimbursement recommendations.

All throughout this past year Nuvasuve was being advised to bring on an in-house reimbursement expert to help navigate this issue and work proactively with insurance companies. Their response: We have external reimbursement consultants that are handling this. And now, no one in my field will want to join them and try to dig them out of this mess.

Obviously, Nuvasive isnt the only company piggybacking on codes. They're just under the microscope because they are bigger. My advice to all up and coming companies: Get someone on your team that knows and understands reimbursement, and I mean really understands your products and the space they are in, not some 'consultant' that charges your $500 an hour to give you silly monthly 'industry news' reports.