CMS delays “reasonable and necessary” definition, expedited breakthrough device coverage process rule

The January 2021 final rule established the MCIT pathway to provide coverage to new, innovative medical devices designated as breakthrough devices by the Food and Drug Administration (FDA). The MCIT pathway provides four years of national Medicare coverage starting on the date of FDA market authorization or a manufacturer-chosen date within 2 years thereafter. The final rule also codified in regulation the long-standing criteria contained in the Medicare Program Integrity Manual regarding when an item or service is “reasonable and necessary” under section 1862(a)(1)(A) of the Social Security Act. The definition of “reasonable and necessary” contains three main elements: An item or service must be (1) safe and effective, (2) not experimental or investigational, and (3) appropriate for use in Medicare beneficiaries. Details of the final rule are available in the Hogan Lovells alert here.

Purpose of delaying the final rule

The effective date for the MCIT final rule is delayed consistent with the Biden Administration’s memorandum titled “Regulatory Freeze Pending Review” and the implementation guidance from the Office of Management and Budget (OMB) in Memorandum M-21-14 dated January 20, 2021. The memorandum directed agencies to consider delaying the effective dates of rules published in the Federal Register that had not yet become effective for the purpose of reviewing any questions of fact, law, and policy the rule may raise.

CMS delayed the MCIT Pathway final rule effective date by 60 days to ensure that: (1) the rulemaking process was procedurally adequate; (2) the agency properly considered all relevant facts; (3) the agency considered statutory or other legal obligations; (4) the agency had exercised reasonable judgment about the legally relevant policy considerations; and (5) the agency adequately considered public comments objecting to certain elements of the rule, including whether interested parties had fair opportunities to present contrary facts and arguments.

Specific areas of concern and invitations for public comment

CMS identified six specific topics on which it would like public comment:

1. The MCIT final rule did not directly explain how the agency would establish coding and payment for particular devices approved through the MCIT pathway. Both coding and payment are central to enabling market access. CMS acknowledged that it underestimated the operational challenges of coordinating coverage, coding, and payment. For example, before MCIT Pathway coverage can be operationalized, CMS must make a benefit category determination (BCD) for the device under Medicare Part A or Part B, and doing so often requires the agency to take into account the setting in which the device is furnished.

2. CMS separately proposed a BCD process for “DMEPOS” items, which include durable medical equipment, prosthetic devices, orthotics and prosthetics, therapeutic shoes and inserts, surgical dressings, or splints, casts, and other devices used for reductions of fractures and dislocations. CMS noted that the MCIT rule comment period ended before the BCD DMEPOS rule was proposed and solicits comments on the alignment of the two policies. CMS states that, while the BCD DEPOS proposed rule only specifically addresses DMEPOS (and not all breakthrough devices), the agency believes the BCD DMEPOS proposed rule may nonetheless serve as a model for resolving similar operational issues in the MCIT pathway that could expedite and facilitate Medicare payment.

3. CMS initially estimated that 2 to 5 devices would likely fall within the MCIT pathway each year in the short term with a gradual increase over time. That was based on the estimate of 97 FDA-designated breakthrough devices at the time. Updated data shows there are more than 400 devices with breakthrough designation currently. CMS seeks comment on whether the agency’s original assumptions about the anticipated number of breakthrough devices that may be eligible for coverage under the MCIT pathway were so flawed that the public did not have a meaningful opportunity to comment on the proposed rule.

4. After the MCIT rule was finalized, some experts published articles questioning whether MCIT coverage would result in improved care for Medicare beneficiaries without evidence that the device benefits the Medicare population specifically. The MCIT final rule gives CMS authority to remove a breakthrough device from the MCIT pathway where the FDA issues a medical device safety communication or warning letter, or if FDA revokes market authorization for a device. CMS seeks comment on whether this removal pathway adequately addresses stakeholder concerns regarding the clinical benefit of the MCIT pathway for Medicare beneficiaries.

5. Some commenters were concerned that there was a lack of clarity on the “reasonable and necessary” definition. CMS seeks comment on whether the public had adequate opportunity to comment on the proposed rule, especially as related to the impact of commercial insurance coverage in the “reasonable and necessary” determination.

6. Finally, CMS seeks comments regarding whether the prior rulemaking process was procedurally adequate and whether interested parties had a fair opportunity to present contrary facts and arguments. CMS asks what issues there may have been, and what should be done to remedy those.

Waiver of proposed rulemaking and 60-day comment periods

Under both the Administrative Procedure Act and the Medicare Act’s separate rulemaking provision, an agency may waive the typical notice-and-comment rulemaking process for good cause, if the agency makes a finding that the notice-and-comment procedures are impracticable, unnecessary, or contrary to the public interest. CMS states that there is good cause to implement the delay of effective date without notice-and-comment on the grounds that there was insufficient time prior to the original (March 15, 2021) effective date to adequately consider advance public comment of the delay. Further, CMS concludes that it needed to delay the effective date because it would be impracticable to operationalize the MCIT final rule by the original March 15, 2021 effective date.

Authored by Beth Roberts, Beth Halpern, Stuart Langbein, Sam Marshall, James Huang, Victoria Wallace, and Boyd Jackson