Reimbursement considerations often influence how a doctor purchases and integrates new technology into his practice. We frequently hear doctors lamenting,"I can't afford to do this procedure if I can't be reimbursed!"

With the dawn of a promising new therapy for wet age-related macular degeneration (AMD), reimbursement is once again a concern. In this article, we'll explain how reimbursement for this therapy is likely to work once the FDA approves the treatment, to help make it easier for you to integrate the procedure into your practice.

The vast majority of patients affected by this disease are 65 years of age or older, so we'll look at reimbursement issues from the standpoint of Medicare only. Because there hasn't been any specific policy established for photodynamic therapy (PDT) reimbursement, it's important to understand and apply current Medicare policy regarding coverage and payment.

PDT combines the use of a specific laser and a photoactive drug -- in this case, Visudyne (verteporfin). As a result, reimbursement for PDT can be separated into three parts:

• physician services
• laser
• pharmaceutical agent.

In addition, reimbursement will be affected by the three different settings in which these elements may be supplied:

• your office
• an ambulatory surgery center
• a hospital.

With these different alternatives in mind, we'll discuss each of the possible billing scenarios.

The National Eye Institute has identified AMD as the leading cause of severe visual impairment and blindness in the United States. It's estimated that AMD already causes visual impairment in about 1.7 million of the 34 million Americans over age 65.

Only 10% of those who suffer from this disease have wet AMD -- the form that Visudyne therapy is able to treat. Despite that statistic, wet AMD is responsible for 90% of all the blindness that the disease causes. For that reason, this new therapy not only represents a huge source of hope for millions of Americans, it also may bring a tremendous number of new patients into your practice.

All this is well and good, but every physician still needs to justify a large investment in terms of potential financial risk and gain. That's why it's crucial to know whether Medicare is likely to pay for the procedure -- and, if so, how much?

Medicare's empowering legislation is contained in the Social Security Act ß1862(a)(1). The passage in question states that Medicare will only pay for services that it determines to be "reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member."

Once it's approved by the FDA, Visudyne therapy should meet Medicare's criteria for a covered service. Furthermore, precedent already exists for coverage because Medicare currently covers "hot laser" argon photocoagulation therapy for AMD (the predecessor to this new non-thermal therapy), even though this type of photocoagulation treatment carries a higher risk of vision loss.

Procedures and services are identified by five-digit CPT (Current Procedural Terminology) codes, determined by the American Medical Association. Under most circumstances, acquiring a CPT code for a new procedure (especially those using new technology) is a long and arduous process. Lacking a better alternative, a miscellaneous code would normally be used, although this can lead to a long and tedious battle for reimbursement.

In this case, using a miscellaneous code isn't necessary; an existing code has been amended for this purpose. CPT code 67220, in the 2000 edition of the CPT handbook, now reads: "Destruction of localized lesion of choroid (e.g., choroidal neovascularization), one or more session, photocoagulation (e.g., laser, ocular photodynamic therapy)." Because this is an established CPT code, using it to get reimbursement should lead to prompt, efficient handling of claims.

In 2000, the national average Medicare reimbursement rate for 67220 is $743.62 when the procedure is performed in the physician's office, and $741.43 when the procedure is performed in a hospital. Because the description states that this covers one or more sessions, charges for repeated treatment performed on the same eye during the 90-day postoperative period are included in the global fee.

Because Visudyne must be administered by a carefully timed, monitored and metered intravenous (IV) infusion, a separate CPT code is also available for the infusion process. When this is performed in the physician's office, the code 90780 ("prolonged I.V. infusion therapy") can be billed.

Most other forms of injection are bundled with the concurrent procedure or service.

Most existing lasers don't have the ability to emit the specific wavelength (690 nm) that's required to activate Visudyne during PDT. Consequently, you'll need to purchase a new piece of equipment in order to incorporate Visudyne therapy into your practice.

Clearly, a large capital investment will require careful budgeting and pose difficult questions -- and the answers to these questions will probably be specific to you, your practice and patient population. Questions to consider include:

• How many procedures can we expect to perform?
• What will the laser cost?
• Will it require maintenance?
• How much space will we need?
• What's required for installation?
• Is the laser portable?

In the physician's office setting, the portion of the physician payment attributed to the practice expense includes reimbursement for the cost of the laser. In other words, there's no added facility fee. In the ambulatory surgery center (ASC) setting, unfortunately, the same rule applies. There's no facility fee for this procedure at present.

In the hospital outpatient department (OPD), Medicare reimbursement is evolving from the old cost-based methodology to the new prospective payment system (PPS), which was mandated by the Balanced Budget Act of 1997. Both the laser and the pharmaceutical will be covered under the new ambulatory payment classifications.

Payment rates are still being formulated. Until the new rates are established later this year, capital equipment is being reimbursed by Medicare at about 90% of the cost.

Before the advent of Physician Payment Reform in 1992, pharmaceuticals furnished "incident to" a physician's services were included in the physician's payment. (To be considered incident to your services, a drug must be furnished in your office.) However, since the implementation of the Medicare Fee Schedule for physician services, Medicare pays for covered drugs and biologicals separately.

The payment rate is the lowest of these three numbers:

• the amount billed
• 95% of the median generic average wholesale price (AWP)
• 95% of the lowest brand name AWP.

Note that no generic equivalent exists for Visudyne.

This payment policy for drugs applies to all drugs furnished to Medicare beneficiaries except those paid on a cost payment basis (as in an outpatient department) or a prospective payment system basis (as in an ASC).

Assuming that the FDA deems Visudyne to be "safe and effective," it will fit Medicare's current definition of a coverable pharmaceutical. (Obviously, Part B deductible and copayment requirements will apply.)

To predict Medicare's probable handling of Visudyne, we can look at how Medicare reimburses similar drugs.

Oncology is another specialty where the physician is reimbursed separately for pharmaceuticals used in the treatment of disease. Oncologists administer chemotherapy treatments in an office setting. The physician purchases the drug and seeks reimbursement from the carrier.

Of particular interest is porfimer sodium (Photofrin). Like Visudyne, it's a photoactive drug -- in this case indicated for the treatment of a variety of cancers. As in PDT, the affected tissue is exposed to a specific laser beam after the patient receives an infusion of the drug. Medicare does reimburse for the porfimer separately from the laser procedure.

In order to bill for a drug, you must use a "J" code. At this writing, Visudyne hasn't been approved by the FDA, so it doesn't have a specific J-code.

Once it's approved, HCFA will determine whether to issue a new HCPCS code. Individual carriers will then determine an allowable reimbursement amount for the drug.

Until that time, when submitting a claim, use J3490, which is defined as representing "unclassified drugs." Note that claim submission with this HCPCS code will require you to provide support documentation on paper describing the drug, its utility and its cost.

Visudyne may also be administered in an ASC or hospital outpatient department. Under current reimbursement regulations, an ASC would be treated as an extension of the physician's office and any physician claim for reimbursement would likewise use a J-code.

Typically, the cost of any medication used in an outpatient surgical procedure has been reimbursed by Medicare. Under the new ambulatory payment classifications (APCs), it's not yet clear how, or if, Visudyne will be reimbursed. It may be bundled with the procedure or paid discretely.

The bottom line is that current Medicare regulations support a favorable coverage determination, even though a specific payment rate for Visudyne hasn't yet been published and a J-code hasn't been established.

Institutional reimbursement, for either a hospital outpatient department or an ASC, is in flux because of the expected introduction of ambulatory payment classifications later this year. (For a summary of the available information, see the table at the top of this page.)

Regardless of the exact details of Medicare reimbursement after FDA approval, one thing is certain: You'll be able to offer new hope to many desperate patients -- and expand your practice as well.

Summary of PDT Reimbursement