The Tricky Finances of Femto-Phaco

Will this ground-breaking technology be able to pay for itself by boosting premium IOL adoption?

By Frank Celia, Contributing Editor

Device manufacturer OptiMedica isn't shy about publicizing the rationale behind the recent sale of its retina and glaucoma divisions. A company press release states the sale will allow it "to focus exclusively on the continued development and commercialization of advanced technologies for the treatment of cataract." Lest anyone miss the point, CEO Mark J. Forchette vowed to "devote all our energy towards revolutionizing cataract surgery."

This announcement came on the heels of Alcon's agreement in July to pay $361 million (plus another $382 million in potential performance bonuses) for LenSx Lasers, the company that is furthest along in obtaining FDA clearances for femtosecond uses in cataract surgery. With a third company, LensAR, also planning to bring this innovative new surgical technique to the US, the business community clearly has faith in its future.

But while the surgery does offer clinical promise, its business model remains elusive. Few see government or third-party payers as viable revenue sources of additional reimbursement. Though the laser should reduce complications, no one is calling it a money saver. Economies of scale aren't guaranteed, and the technology won't be cheap. But proponents are upbeat. "Having used this technology, I can tell you: it's that good. So somehow we are going to make the business model work," says Louis D. Nichamin, MD, a Brookville, Pa., surgeon and consultant to LensAR.

This article highlights some factors that could influence the economics of this potentially fundamental change in cataract surgery.

Premium Procedure, Superior Outcomes

Femtosecond laser devices essentially automate the three most challenging aspects of cataract surgery: the corneal incision, the capsulorhexis and the subdividing of the lens nucleus. They can also perform limbal relaxing incisions. All of this is done with a precision, reliability and repeatability impossible to achieve manually. In current workflow models, the patient undergoes pretreatment with the femtosecond laser device and is then moved to a surgeon who aspirates the cataract. The incisions yield easily to a blunt instrument, and the nuclear pretreatment means anterior capsule removal requires less ultrasonic energy.

Other advantages include an implant more perfectly seated and "shrink-wrapped" because the capsular edges can be made to overlap the IOL by 0.5 mm for 360 degrees; a more perfectly constructed and air-tight wound that should reduce endophthalmitis; and a potentially drastic reduction in capsular tears.

As many predicted, femtosecond laser cataract surgery will enter the market, at least initially, as a value-added service offered to patients interested in having pre-existing astigmatism corrected by LRIs or a toric IOL, and those who would prefer a presbyopia-correcting IOL over reading glasses. The ability to center an IOL precisely is looked at as a game-changer that will dramatically improve premium IOL performance.

"I think the future of premium IOLs is very bright," says Stuart Raetzman, Area President US and Vice President of Global Marketing for Alcon. "More and more physicians are implanting them, especially toric IOLs. There is a fuller realization that correcting astigmatism at the time of surgery will become the standard of care. The initial interest in the LenSx laser will be from surgeons heavily involved in premium IOLs, but the reality is more and more surgeons are entering that category every month."

Others familiar with the technology agree. "I'm confident that femtosecond cataract surgery will significantly increase the market for premium IOLs very quickly," says Dr. Nichamin. He attributes premium IOLs' slow growth thus far to several factors, including a failure to achieve optimal refractive outcomes, a situation soon to be improved (see "In Pursuit of Perfection" below). Femto-enhanced outcomes should put wind in the sails of the premium market.

However, surgeons may find that having the wind at their backs will take them into uncharted waters, given the increased reliance on private-pay charges. Business savvy will gain in importance if the practice is to recoup its investment in the laser and also cover per-procedure fees, which Mr. Raetzman confirms will be part of Alcon's deployment of LenSx. Once word spreads of the excellent outcomes that can be achieved via femtosecond technology, patients will be more inclined to incur an upcharge, Dr. Nichamin believes.

The CMS rulings of 2005 and 2007 not only allow upcharges for the astigmatism- and presbyopia-correcting IOLs themselves, but also for any other extra work the surgeon must perform while implanting them. Under such a pricing model, if a femtosecond system uses an imaging device to help position a premium IOL more precisely, that service is considered non-covered and therefore can be billed to the patient. Experts express confidence that the business model for femto-assisted cataract surgery falls within the existing CMS parameters for patient-shared billing, but ultimately each practice bears the responsibility to ensure that its pricing and marketing strategies remain compliant.

Femtosecond technology could have an impact on other aspects of cataract surgery, perhaps ones unpredictable at this early stage. "The entire phaco process is going to be viewed differently when a patient is rolled into the OR who already has a perfect, multi-plane incision, the lens is fragmented, the capsulorhexis already done," says Mr. Raetzman. Bringing LenSx in-house will allow Alcon to reengineer some components of its cataract surgery line to better complement the laser's capabilities, he says. "This opens the door for things like new phaco tips and sleeves, and instruments that maximize the entire procedure, changes in fluidics and power, and many other potential innovations." Surgeons can expect to see femto-inspired enhancements to Alcon's products begin debuting as early as 2011, according to Mr. Raetzman.

"As a standalone technology, it is remarkably innovative, but when you think about a company like ours that can actually take that innovation and then magnify and multiply it throughout the rest of the cataract procedure, this presents an enormous opportunity," says Mr. Raetzman. "Alcon has been a partner with surgeons for decades, and we see this as just another step in improving the entire cataract surgery procedure and we look forward to continuing that relationship."

Putting it Into Practice

The success of this new technology hinges on the ability of surgeons and patients alike to cost-justify their investments.

For surgeons. The ideal customer for a femtosecond laser system would be a high-volume cataract surgeon with a strong interest in premium IOLs who performs the majority of his or her surgeries in an ASC setting. Those three factors (volume, patient-shared billing and ASC facility fees) increase the odds that a practice can cover the cost of the laser, which is expected be at least as much as the femtosecond lasers used in LASIK refractive surgery — and possibly more since the technology is more complex. LASIK femtosecond devices run in the $325,000 range, so cataract lasers could be priced around there or perhaps higher, according to those familiar with the market, although none of the manufacturers have yet quoted prices.

A safer, more consistent cataract procedure means fewer complications and better outcomes, but no one has gone so far as to argue that femtosecond cataract surgery will pay for itself via increased efficiencies. Pretreatment will make nucleus extraction easier and quicker, to be sure, but when laser time, data entry and moving the patient are factored in, surgery speed probably won't be gained. In fact, among those who can knock out a case in 10 or 15 minutes, lasers might actually add time per surgery. Fewer complications are always welcome, but endophthalmitis and capsular ruptures occur so infrequently their reduction is not viewed as an area of significant potential cost savings.

The user-friendly nature of the laser raises the possibility of a potential flow model in which a technician or physician's assistant performs the pretreatment, then sends patients to surgeons waiting in nearby ORs for nucleus removal. If the center were large enough — say, six or 10 ORs — economies of scale might be realized.

Theoretically, such a model could be tried, says William W. Culbertson, MD, director of cornea service and refractive surgery at Bascom Palmer Eye Institute, University of Miami and a consultant to OptiMedica. "I don't see any reason why it couldn't be done," he says, adding that physician assistants at high-volume cataract practices have been contributing to the preoperative aspects of cataract surgery for several years.

Practically speaking, however, such a model probably wouldn't work, he noted. Patients understandably expect the presence of their physician during important procedures. Refractive surgeons face a similar situation in creating femto flaps during LASIK. A technician could perform the flap cut, but patients might find it disconcerting. Moreover, such an "assembly-line" approach to cataract surgery wouldn't likely appeal to US physicians or patients. Dr. Culbertson feels that most of the cost savings will be realized postoperatively in reducing the consultation and management time with patients who may have experienced a complication with manual phaco or who have had a sub-optimal residual refractive error outcome.

For patients. Per-procedure fees will almost certainly figure into every business model. Again, no one has quoted numbers, but if these "clickfees" fall within LASIK ranges, they will be about $120 for those who own the laser and $220 for those who lease.

Mitchell A. Jackson, director of Jacksoneye in Lake Villa, Ill., says he is intrigued by the technology but worries about how much money premium lens patients will be willing to pay for femto technology. If the femtosecond up-charge is substantial, on top of the already steep premium lens cost, he doubts interest will be high. Keeping the upcharge reasonable, especially in this economy, will be the key to its success in his opinion.

Some physicians also worry that if femto surgery proves safer than manual surgery, excluding poorer patients from its benefits might constitute an ethical breach. Writing in this magazine earlier this year, Larry Patterson, MD, cautioned, "I don't want to put my patients in the position of having to decline a superior procedure because of financial concerns."

In response, proponents point out cataract surgery has long contained a two-tier quality structure, in the form of extracapsular extraction vs. phacoemulsification. Phaco has better outcomes than extracapsular extraction, yet to this day reimbursement for both procedures is equal, notes Dr. Culbertson. He believes that although femtosecond cataract surgery may ultimately prove to have better refractive outcomes and be safer as well, he doubts that third-party payers will be ready to cover the increased costs of employing this technology in the near future. Likewise, insurers have always felt it to be perfectly ethical for patients to wear glasses after cataract surgery. Outcomes that surpass that standard will justify out-of-pocket costs, he and others believe.

There is also the question of how standard-lens patients will feel about manual techniques, as marketing is sure to tout the superiority of laser cataract surgery. "We may actually lose cataract cases initially," Dr. Jackson cautions. "Patients expect Medicare to cover everything. When they find out laser surgery isn't covered, they may refuse to settle for second-best and decide not to have the surgery at all. This is part of the real-life stuff we are going to have to face."

Nevertheless, in terms of patients' ability to pay for femtosecond technology, industry officials remain confident. "The demographics of this procedure are probably less affected by the current economic situation than some others," says Mr. Raetzman. "When you think about the LASIK market, a younger population, you can understand why an unemployment rate around 10 percent would have a chilling effect. But cataract surgery is a once-in-a-lifetime event for people who are usually beyond their working years. If you look at the premium IOL market, there has been a little flattening, but it hasn't been affected to near the extent that LASIK has. We're confident that cataract patients will understand and eagerly choose this technology." OM