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News & Trends - MedTech & Diagnostics

Johnson & Johnson prioritises value and health outcomes in submission on Prostheses List reforms – Interview

Health Industry Hub | February 22, 2021 |

MedTech News: The Australian MedTech sector understands the need to ensure that private health insurance (PHI) is viable moving forward and hence the need to reform the current settings. 

In December 2020, the Department of Health released a consultation paper seeking stakeholder feedback on the proposed options for the Prostheses List (PL) reforms with submissions due on 15 February 2021.

In an interview with Health Industry Hub, Jane McMillan, Senior Director Government Affairs and Policy, Johnson & Johnson, discussed the company’s submission to the Department of Health and explored the essentials in ensuring value for patients in the private healthcare sector, the importance of maintaining clinician choice in line with patient needs and a reform option that supports the MedTech sector in innovation and longevity.

Health Industry Hub: The average benefit paid on the Prostheses List (PL) in September 2020 is 10.8% lower than the average benefit in 2017. How have these savings been delivered?

Jane McMillan, Senior Director Government Affairs and Policy: The medical technology sector has repeatedly delivered savings and efficiencies to ensure the sustainability of our private healthcare system. The MedTech sector has been the sole contributor in decreasing private health insurance premium increases to their lowest level in 20 years through the agreement between the Medical Technology Association of Australia’s (MTAA) and government to deliver $1.1 billion in savings.

There is no ambiguity about whether the $1.1 billion savings have been achieved. The average benefit paid on the Prostheses List in September 2020 is 10.8 % lower than the average benefit in 2017 because of the reductions.

Click to enlarge image. Source: Medical Technology Association of Australia, 2021.

Health Industry Hub: Why do you think Private Healthcare Australia keeps insisting that those savings have not been delivered?

Jane McMillan: For a range of reasons including that they are seeking further efficiencies from every other player in the healthcare sector in order to both deliver lower premiums and retain their profitability.

Health Industry Hub: Private Healthcare Australia makes a shocking statement in its pre-budget submission 2021-22 “The greatest savings providing no patient disadvantage comes in reforming funding for medical devices. Private health funds are required to pay for items on the Prostheses List regardless of quality, efficacy, efficiency or safety.” Is there any evidence to support this?

Jane McMillan: It is quite an irresponsible allegation that touches on the credibility of hospitals, surgeons and medical technology companies. Medical devices can only become available in Australia once they have undergone rigorous TGA and Department of Health processes.

It is important, particularly during a global pandemic, that people continue to have trust and faith in the healthcare system and I don’t think it serves the private health insurance industry well to be scare mongering and undermining the healthcare system with no evidence to back up that statement.

Every choice made in a surgery needs to be one made by a clinician in consultation with a patient. Clinicians must be empowered to make whatever choices they need to get the best health outcome for that patient. MedTech companies and the private health insurance industry should never be involved in that clinical decision making.

Health Industry Hub: How has J&J engaged with surgeons or hospital groups in better understanding their perspectives and concerns on the potential impact of the PL reforms?

Jane McMillan: Many stakeholders including the private health insurance sector, Day Hospitals, Catholic Health Australia, the MedTech industry, surgical colleges, APHA and other representatives have been working over the last four years on a range of items regarding the PL, including structural reforms and other issues that we committed to working on for the life of this strategic agreement.

The PL reform options presented by the Department of Health were quite extreme and represented fundamental reform, including the suggestion, through one of the options to abolish the PL and establish a Diagnostic Related Group (DRG).

J&J and MTAA have been working closely with the key stakeholders to discuss the implications. It is fair to say that every player in the sector apart from the private health insurance sector backs the retention of the PL. The view is that while the current system may not be perfect it provides predictability and can be improved on. There is collectively a strong opposition to the introduction of a DRG funding model (including in the recent submission from the AMA (Australian Medical Association) and AOA (Australian Orthopaedic Association).

There is strong consensus to maintain clinical choice by the medical practitioner, access to a range of prosthetic items to suit  patient needs and no out of pocket costs for patients.

Health Industry Hub: How does the patient and product mix play a role in the medical devices chosen by a surgeon? Is it a one size fits all?

Jane McMillan: The core value proposition for private health insurance is choice – choice of doctor, choice of timing of the procedure, choice of the hospital and the expectation that the patient’s medical professional will have a choice of a range of medical technologies to provide the highest standard of care that you are entitled to as a policyholder paying for the significant cost of private health insurance.

No two patients are the same even if they are going in to have the same treatment. That is why it is critically important for surgeons to be able to make the best choices prior to and during surgery to deliver the best patient care.

The concern with the abolition of the PL or with the implementation of the recommendations of the General Miscellaneous review is that there will be hundreds of medical technology products no longer available in that private healthcare setting.

The Ernst and Young report Review of the General Miscellaneous Category of the PL which has fed into the reports at the end of last year, made quite an extensive recommendation to remove 70% of those items.

Many of these items are quite central to the delivery of safe and effective surgery. An example includes the surgeon’s choice of sophisticated wound closure devices that reduce rates of infection and improve health outcomes. Unless the hospital absorbs the cost, patients will pay more out of pocket costs which is not the ambition of the healthcare sector.

Another important fact to consider is that if we move to a bundled payment system or the DRG system, it reduces the incentive for a private hospital to deal with complex cases because they will be faced with a bundled payment for a particular procedure regardless of how complex that procedure is or may become. The private hospitals may then be incentivised to pass on complex cases, requiring more expensive technologies and services, to the public hospitals which is not a sustainable outcome. Alternately, if they maintain the complex patient in the private sector, there may be increased out of pocket costs for the patients.

Health Industry Hub: How does J&J recommend proceeding with the PL reforms to ensure best outcomes for patients, maintain choice for clinicians and to ensure the MedTech sector is sustainable and thrives?

Jane McMillan: All of the reforms that have occurred to this sector over the last five years have not improved participation rates in private health insurance despite the MedTech sector’s significant price cuts in that time. This is sending a very clear signal that people are no longer seeing the value of private health insurance and we continue to see people drop out. We need to be addressing any changes from the perspective of consumers.

J&J and the MedTech sector fully support private health insurance and a healthy private healthcare sector. However, we do not think the PL reforms as they stand address that core value proposition.

J&J has outlined a comprehensive way forward in our submission. The MedTech industry is willing to continue to make concessions around pricing that ensure the industry is sustainable.

We are asking for considered and timely reforms, and consultation with all stakeholders. We stand beside consumer groups, surgical groups and the hospital sector to say the PL should be retained, business should have certainty. We are willing to explore how we can make the PL function better, ensure that the reimbursement pathway is clear and discuss considered reductions in pricing to allow greater access to innovative medical technology to enhance patient outcomes.

In line with MTAA’s submission, J&J’s suggested PL reform pathway for medical technology most closely aligns to Option 2 in the Government’s Consultation Paper but with modifications that protect the value proposition of private health insurance for consumers, namely access to a broad range of medical technologies that will improve health outcomes.

Any reforms to the sector must acknowledge that the healthcare sector faces the same, if not more, challenging commercial environments as other sectors of the economy and will do so for the foreseeable future. Any reforms proposed by the Australian Government must contribute to a high-functioning and sustainable private healthcare sector for all stakeholders including the Australian MedTech sector.


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