Transcatheter Aortic Valve Replacements Will Grow. Who Will Benefit?
Edwards LifeSciences (EW) recently completed a trial pitting Sapien XT transcatheter aortic valve's
vs. the Sapien. In its
first pivotal clinical trial, Sapien XT demonstrated non-inferiority
which is a positive omen for the FDA approval
process. Assuming approval, XT will help EW's transcatheter line
hold its own in the U.S., amid future entrants. The primary
competitor is Medtronic's (MDT)
whose product's entry might be delayed due to a recent FDA action letter.
We have noted previously that we
believe that the transcatheter aortic valve implantation (TAVI)
procedure is clinically useful and will undoubtedly grow. Never the
less, there is uncertainty regarding margins for EW and other TAVI
makers.
Many facilities performing TAVI are taking a more conservative coding
approach subsequent to Medicare Recovery Audit Contractor audits. One view is that the TAVI procedure codes
include a left heart
angiogram and that this obviates the charging of MS-DRG’s
216-219 on a routine basis (which require the independent invocation
of the left heart angiogram procedure code, in their view). MS-DRG’s
216-219 are much better reimbursed than sister codes MS-DRG’s
219-220 (which do not invoke a separately coded left heart
angiogram). Furthermore, if cases can be coded to the MS-DRG’s 216 &
219, which are for patients with major complications and
co-morbidities, some institutions find that patients rarely stay in
the hospital for the average 17 and 13 days respectively with
frequent discharge to rehab services. Unless such a service is owned
by the hospital allowing for seperate capture of that revenue,
Medicare’s claw back of the per-diem related to the lost hospital
days can be problematic for the institution. In addition, some
institutions are finding that commercial PARTNER 1 patients are
stable at the time of the procedure status post prior balloon
valvuloplasty and not in acute heart failure, the principal
co-morbidity for coding the MS-DRG’s 216 and 219. Such cases compel
institutions to place TAVI patients in MS-DRG 220 (complications and
co-morbidities w/o left heart catheterization) which is uneconomical
for less well reimbursed institutions given the current $32K TAVI
device price point (contrast Morton Plant’s reimbursement in 2010
with that of Columbia in the table below - source PARTNER
Presentation TCT). In the foreseeable future, most of the PARTNER 1
volume may shift to the better reimbursed (mostly teaching)
institutions who also benefit from incremental revenue associated
with the pre and post procedure testing, and the additional surgical
volume driven by increased referrals in areas that lack well
established TAVI competitors. In the future, as the TAVI indication
expands to more stable patients (e.g., PARTNER 2), poorly reimbursed
institutions will likely be required to shoulder more of the
surgical volume and patients will likely not be coded to the most
lucrative MS-DRG’s (216 and 219).
The TAVI global market is sizable and underpenetrated. However the pricing uncertainties and competition that will inevitably come, makes forecasting EW's share and revenues more difficult and unpredictable.
| MS-DRG 216 | MS-DRG 217 | MS-DRG 218 | MS-DRG 219 | MS-DRG 220 | MS-DRG 221 | Total/Average | |
| Buffalo General (NY) | $70,878 | $47,565 | $37,891 | $59,120 | $38,525 | $32,000 | $50,387 |
| Beth Israel Newark (NJ) | $95,453 | $64,102 | $51,091 | $79,640 | $51,943 | $43,167 | $67,896 |
| Columbia (NY) | $102,117 | $68,553 | $54,624 | $85,188 | $55,537 | $46,142 | $72,616 |
| Hartford Hospital (CT) | $79,186 | $53,155 | $42,353 | $66,057 | $43,060 | $35,774 | $56,306 |
| Hoag Newport Beach (CA) | $62,040 | $41,598 | $33,115 | $51,730 | $33,671 | $27,948 | $44,073 |
| Lennox Hill (NY) | $86,573 | $58,103 | $46,288 | $72,214 | $47,062 | $39,093 | $61,549 |
| Morton Plant (FL) | $55,567 | $37,266 | $29,671 | $46,337 | $30,169 | $25,047 | $39,481 |
| Robert Wood Johnson (NJ) | $79,381 | $53,275 | $42,441 | $66,214 | $43,150 | $35,843 | $56,435 |
| University of Pennsylvania (PA) | $92,738 | $62,223 | $49,700 | $77,398 | $50,527 | $42,013 | $65,992 |
| University of Wisconsin (WI) | $81,685 | $54,921 | $43,814 | $68,185 | $44,542 | $37,050 | $58,160 |
| University of Washington (WA) | $92,738 | $62,323 | $49,700 | $77,398 | $50,527 | $42,013 | $66,004 |
| Average | $81,669 | $54,826 | $43,699 | $68,135 | $44,428 | $36,917 | $58,082 |
