The FDA to Evaluate 25 Medical Devices Marketed Before 1976 Without Premarket Approval

The FDA announced last week that they are requiring the makers of 25 medical devices marketed before 1976 to submit safety and effectiveness information regarding their devices.   These devices were allowed onto the market without undergoing the current FDA testing and classification because they were first manufactured before the Medical Device Amendments to the Food, Drug, and Cosmetic Act of 1976, and include many of the riskiest devices — defibrillators, pacemakers accessories, and heart valves.

The FDA classifies medical devices into three categories, with class III being the riskiest devices– as such, they require premarket approval.  Currently, the 25 pre-amendment devices in question are class III, but based on the 1976 law these devices were not required to undergo premarket approval at the time.

The FDA will use the submitted safety and effectiveness data to review the devices and classify them into what they deem to be the appropriate risk category.  According to the FDA, if a device is found to be a class III device, the manufacturer will need to submit a premarket approval application.  If the device is moved to class I or II, it will not require premarket approval.

The FDA’s announcement comes after the Government Accountability Office reported in January that the FDA was not doing enough to thoroughly evaluate the safety and effectiveness of many medical devices marketed before 1976.  They urged the FDA to review the devices and said that “it is imperative that FDA take immediate steps” to fix this review and approval process for devices.

Daniel G. Schultz, M.D., director of the FDA’s Center for Devices and Radiological Health, said regarding the FDA’s new requirement:

We are taking the necessary steps to complete this very complex process while continuing to protect public health by thoroughly reviewing and evaluating all medical device submissions presented to the agency.  New premarket notification submissions for devices of these 25 types will continue to receive an appropriate level of scrutiny to ensure safety and effectiveness.

This decision to evaluate these devices and further public safety comes after recent criticism of the agency, such as the opinion expressed publicly by a number of  FDA scientists that the “FDA is fundamentally broken.”  We have blogged about the much maligned agency on numerous occasions, with specific emphasis upon the Center for Devices and Radiological Health and a decline in medical device lab inspections.

Gupta Not the Next Surgeon General

A.P. has reported that Dr. Sanjay Gupta has withdrawn himself from consideration to be the nation’s next Surgeon General. Dr. Gupta was said to have been President Obama’s top pick for the job. Aol.com reports that “The Obama administration confirmed that Gupta, a neurosurgeon, had taken himself out of the running because he wants to focus on his medical career and spend more time with his family.”

Gupta’s withdrawal comes as somewhat of a surprise considering earlier reports (see post on this blog, Jan. 6, 2009) from CNN which stated “that its sources say that Dr Gupta ‘is inclined to accept the position very soon’ and [that he] has “approached both CNN and CBS management about getting out of his journalistic contracts.” CNN also noted at that time, however, that accepting the Surgeon General position would require Dr. Gupta to accept a substantial cut in pay.

A.P reports that regarding Gupta’s appointment, “Political opposition had started to form,” and that “House Judiciary Committee Chairman John Conyers, D-Mich., called Gupta inexperienced and circulated a letter urging Obama not to appoint him.”

Presumably, in addition to his other responsibilities, Dr. Gupta will continue blogging at www.pagingdrgupta.blogs.cnn.com/.

Sebelius to Head HHS, Not Everyone is Thrilled

President Barack Obama formally nominated Kansas Governor Kathleen Sebelius as Secretary of Health & Human Services today, according to USA Today.  We have been following the likelihood of Sebelius’ nomination since Tom Dachle withdrew his nomination last month.

Sebelius made a reputation for herself as Kansas’ insurance commissioner for eight years before being elected governor.  While insurance commissioner, she established herself as a consumer advocate capable of reining in health care spending.

Sebelius has been the favorite to head HHS, but her nomination has raised concerns among anti-abortion advocates such as the conservative Catholic League, according to U.S. News.  Troy Newman, president of Wichita-based Operation Rescue, says that the group will aggressively oppose Sebelius’ confirmation in the Senate.

According to KSALLink.com, Sebelius said in a statement responding to the issue that as a public official she has worked hard to ensure that abortions are “rare, safe and within the bounds of the law.”

President Obama will host a summit later this week with representatives from various health care sectors to address his plans to revamp the U.S. health care system.  No word on whether Howard Dean, a physician and former governor of Vermont, will be in attendance.  FOXNews.com reports that Dean has expressed his disappointment with being passed up for the nomination again, stating:

“I was pretty clear that I would have liked to have been Secretary of HHS but it is the president’s choice and he decided to go in a different direction.”

The IRS, Nonprofit Hospitals, and the Meaning of “Community Benefit”

Kaiser.org has written an interesting article about the recent two year IRS Study of nonprofit hospitals under 501(c)(3). The IRS queried 5oo nonprofit hospitals, with the study’s findings based primarily upon examination of 489 of those. Under the strictures of 501(c)(3) nonprofits are confined to paying executives “reasonable compensation” and supplying “community benefit.” Unfortunately, neither of these terms are particularly well defined. In the study’s executive summary, the IRS puts it so:

“The community benefit standard is the legal standard for determining whether a nonprofit hospital is exempt from federal income tax under section 501(c)(3) of the Internal Revenue Code.”

“Observations. Both the community benefit and reasonable compensation standards have proved difficult for the IRS to administer. Both involve application of imprecise legal standards to complex, varied and evolving fact patterns.”

The Kaiser article notes that according to the NY Times, “Lawmakers over the last few years have ‘raised concerns over whether nonprofit hospitals provide enough free care and other community benefits to justify their tax exemptions,’ but no test exists for ‘measuring how much community benefit is enough or even what constitutes community benefit.’”

These limitations may be seen in the characterizations of “community benefit” available to the hospitals in the study. Bad debt and Medicare payment shortfalls may be construed as  “community benefit.” As the debt, the credit injury, and the collection calls all inure to the community member who received treatment but could not pay, one might question if the “community benefit” involved in a failure of collection practices might be distinguishable from the “community benefit” involved in intentional charitable care. In addition, there simply is no set criteria to determine the appropriate amounts to be charged as “community benefit.” The IRS study poses the following under the heading of

“Limitations: …although the IRS designated the general categories of activities that could be reported as community benefit for purposes of the study, determining what was treated as community benefit (for example, bad debt or Medicare shortfalls) and how to measure it (cost versus charges) was largely within the respondents’ discretion.

Which is to say that those being monitored (nonprofit hospitals) to gauge the amount of money spent– to justify their tax exempt  status– were free to characterize their contributions in the manner they thought best.

Medicare shortfalls: So… if a non-profit hospital has a fee schedule rate of $100 for a procedure, and Medicare has a reimburse rate of $80 for that procedure, if a “charge” rate of measurement is used then there has been a $20 “community benefit” if the federally designated tax exempt nonprofit hospital accepts as payment the federally designated and predetermined Medicare reimbursement amount. Significantly, 19% of the hospitals also claimed “shortfalls” in payment from private insurers as uncompensated care/community benefit (See Chart: “Figure 82,” p. 105, full report).

Cost vs. Charge: So… if a procedure has a cost to the hospital of $80 and a fee schedule rate of $100, and the recipient of the procedure does not pay and the hospital categorizes the non-payment as “bad debt,” it has the ability to count as “community benefit” not only the cost of its unintended largesse, but also the amount it had expected as profit.

Perhaps even more telling than this latitude in characterization are the amounts actually submitted to the IRS as community benefit. Here are a few of the findings:

• The average and median percentages of total revenues reported as spent on community benefit expenditures were 9% and 6%, respectively.
• Uncompensated care accounted for 56% of aggregate community benefit expenditures reported by the hospitals in the study.
• Uncompensated care was the largest reported community benefit expenditure for each of the study’s demographics, other than for a group of 15 hospitals reporting large medical research expenditures (93% of all research expenditures reported by the study’s respondents).
• Further, the group of 15 hospitals reporting large medical research expenditures materially impacted the overall numbers in this area. For example, when the research group is removed, the percentage of total community benefit expenditures reported as spent on uncompensated care increases from56% to 71%, and that spent on medical research decreases from 15% to 1%.
• Uncompensated care and community benefit expenditures were concentrated in certain hospitals and unevenly distributed. For example,9% of the hospitals reported 60% of the aggregate community benefit expenditures of the overall group; 14% of the hospitals reported 63% of the aggregate uncompensated care expenditures.

So… if we were to take the 15 research hospitals out of the mix, 73% of the “community benefit” for the remaining 474 hospitals was in the form of uncompensated care–Medicare (and private insurance) shortfalls and bad debt inclusive.

In addition, of the substantial uncompensated care component, hospitals contributions were disparate: 14% of the hospitals reported 63% of the total–which is to say that roughly 68 hospitals out of the 489 accounted for 63%, while the other roughly 421 hospitals chipped in a somewhat less magnanimous 37% of the total. This despite the considerable latitude in characterization.

The Kaiser article notes that according to the NY Times

“In a statement, Sen. Chuck Grassley (R-Iowa), who since 2005 has sought to require not-for-profit hospitals to justify their tax exemptions, said that the study did not include adequate definitions or comparable information on community benefits for-profit hospitals provide. He said, “Neither the IRS nor Congress has done a very good job when it comes to establishing the criteria for enjoying this tax status since the IRS scrapped charity care for its community benefit standard in 1969″ (New York Times, 2/13)”

New Candidates to Head HHS Emerge, Suspense Mounts

Two additional candidates have emerged as possible nominees to be secretary of health and human services, reports The Washington Post. According to Democratic sources in and around the White House, those candidates are Lloyd Dean and Jack Lew.

Dean is chief executive of San Francisco-based Catholic Healthcare West and was recently named one of the top 25 minority health care executives by Modern Healthcare Magazine. Lew was involved in health care reform during the Clinton Administration and worked in the White House Office of Management and Budget, according to The Post. One small snag, reports The Post, is that Lew was recently confirmed as deputy secretary of state.

Yesterday we reported that Kansas Governor Kathleen Sebelius was at the top of Obama’s list to replace former Senator Tom Daschle as the nominee for U.S. Secretary of Health & Human Services. Sebelius removed herself from consideration for a cabinet position last December, citing the need to reform Kansas’ budget. However, The Wall Street Journal reports that Gov. Sebelius told Ron Pollack, president of Families USA, that she would accept the nomination for secretary of health and human services.

Sebelius, Podesta on Obama’s Short List to Replace Daschle

A top official in the Obama administration says that Kansas Governor Kathleen Sebelius is at the top of the list to replace former Senator Tom Daschle as President Obama’s nominee for Secretary of Health & Human Services, according to the AP/Kansas City Star. This comes after Daschle withdrew his nomination last week, leaving many wondering about the future of U.S. health care reform.

Sebelius has been praised by advocacy groups for the “watchdog role” that she played for eight years as insurance commissioner before she became governor. The Kansas Governor was an early supporter of Obama’s campaign for the presidency. After Obama won the election in November, she was in consideration for several cabinet posts. In early December though, she announced that she had removed herself from consideration for a Washington job, citing Kansas’ budget problems that needed her attention.

Also on Obama’s short list is former White House chief of staff under President Clinton, John Podesta, and Tennessee Governor Phil Bredeson. Some advocacy groups are reportedly lining up to oppose the nomination of Democratic governor from Tennessee. Bredeson remains under consideration but was not as likely as Sebelius to make the final cut, the senior official said.

Read more

Health & Taxes

Only a few short months ago, Barack Obama was elected President of the United States of America. Supporters rejoiced, “Yes we did!” Shortly after that historic event, then President-elect Obama announced his nomination of former senator Tom Daschle to be his secretary of health and human services. Advocates of universal health care reform were ecstatic.

With the release of Critical: What We Can Do About the Health-Care Crisis and his nomination for U.S. Secretary of Health and Human Services, it seemed that Tom Daschle was the solution to all of our nation’s health care woes: a fragmented and inefficient patchwork of public and private payors, rising costs, too many government ties to the private sector, and a lack of uniformity on the proper spelling of “health care.”

Yet it appears that that dream is over: Daschle announced today that he is withdrawing his nomination for Secretary of Health and Human Services. CNN.com reports that, in announcing his withdrawal, Daschle said:

[I]f 30 years of exposure to the challenges inherent in our system has taught me anything, it has taught me that this work will require a leader who can operate with the full faith of Congress and the American people, and without distraction.

The president said Tuesday he accepts Daschle’s decision “with sadness and regret,” according to CNN.com.

Read more

HHS OIG Report Finds Part D Private Insurers Overcharged for Billions, Lack of CMS Oversight

According to a recent report by the Department of Health & Human Services, Office of Inspector General, private insurance companies that operate plans under the Medicare prescription drug benefit have overcharged Medicare beneficiaries and the program by several billion dollars since the program began in 2006.

According to the report, 80% of health insurers that operate plans under the Medicare prescription drug benefit overcharged the program by about $4.4 billion in 2006 alone. In addition, The McClatchy/Raleigh News & Observer reports that the Centers for Medicare & Medicaid Services (CMS) remains unaware of the total impact of the practice because of its failure to perform required audits.

Read more