Healthcare's obsessive attention to the landscape-changing introduction of drug-eluting stents in the past two years has seemingly put the plumbers of cardiac care-cardiologists-at the head of the pack. But the electricians-the electrophysiologists-might just be the proverbial tortoises in the race for profit margin.
It is widely projected that the CMS' expansion in January of Medicare coverage for pricey implantable cardiac defibrillators, or ICDs, will double or triple the number of eligible Medicare beneficiaries for the devices, which prevent death from sudden cardiac arrest by jump-starting the heart at the moment of crisis. That will add even more volume to an already fast-growing sector of cardiac care that is concurrently suffering from a shortage of specialists with sufficient expertise to perform the procedures and also straining to keep things profitable with Medicare payments barely covering the costs of some of the devices.
"I'm concerned about the overall effect of so many patients needing ICDs on the overall healthcare system," says Cathy Clark, manager of the cardiac catheterization, electrophysiology and interventional radiology labs at 298-bed University of Colorado Hospital in Denver. "The reality is we are all going to die sometime and at some point in time you have to decide what are the risks and benefits vs. costs. That is an ethical question we are going to have to ask. There are wonderful technologies, but how do we apply them? Those are issues as a nation that we're going to have to deal with."
In 2003, the American College of Cardiology reported that 70,785 heart patients were eligible for ICDs for congestive heart failure, says James Burns, vice president of Corazon Consulting, which specializes in cardiac care. From 1998 to 2001, electrophysiology procedures overall increased 8%, while ICD implants increased 24%, he says.
Now that the CMS has expanded coverage to include patients with congestive heart failure who are not quite as sick as traditional cardiac patients, most of whom have suffered heart attacks, an estimated 240,000 Medicare patients are eligible for the devices, he says.
Boosting charges, margins
It is estimated that electrophysiology services account for nearly 5% of all cardiac discharges and 6% of all inpatient cardiac days, according to Corazon's research. Meanwhile, looking at electrophysiology as a whole-including pacemaker implantation; cardiac mapping, the procedure for tracking the heart's electrical signals to detect abnormal areas in the electrical system; and ablation, the process in which diseased tissue is removed to interrupt a faulty "electrical circuit"-the average profit margin of the electrophysiology service line for hospitals based on the CMS' data is 18.4%, Burns says. That contrasts with the margin for general and interventional cardiology, which nationally were 5.7% and 15.7%, respectively, in 2001, Burns says. Cardiovascular services, including electrophysiology, typically represent as much as 40% of a hospital's net revenue, making the service line a crucial contributor to a hospital's financial solvency.
"Cardiac margins are, generally speaking, much higher when you get into procedural-based rather than medical-based treatments," Burns says. "As a service line, cardiac care seems to be able to organize itself more efficiently than other areas."
At the University of Colorado Hospital, for example, which is dealing with a payer mix heavy with indigent care, profit margins in electrophysiology are about 10%, excluding indirect costs-a narrower margin than the hospital would like, Clark says. The program has managed to sustain those margins by partnering with vendors for good pricing contracts, she says.
Two part-time and two full-time electrophysiologists, who are board-certified to practice the subspecialty by taking an exam administered by the American Board of Internal Medicine, are handling about 500 electrophysiology procedures and another 1,500 clinic visits each year at the hospital, which would like to recruit two more physicians, Clark says. If so, case volumes could easily double, she says.
"There's a lot of competition for (electrophysiology) docs. They are highly sought after by many groups. It's a booming specialty," Clark says.
The electrophysiologist shortage has reached a point where, hoping to avert a turf war with cardiologists, the Heart Rhythm Society, the professional society for electrophysiologists, is offering training on ICD and cardiac resynchronization device implantation to nonelectrophysiologists. Cardiologists' interest in performing the procedure was raised by the Medicare expansion, says Anne Curtis, the newly installed president of the Heart Rhythm Society and chief of cardiology and chief executive officer of cardiovascular services for the University of South Florida at Tampa's College of Medicine.
"What we were concerned about was the procedure being done by people without the proper training and knowledge to do it. There was some talk about weekend courses being held. We were concerned that it was going to be an abbreviated version of what people really needed," Curtis says.
"The real message is that this is not designed to open up the floodgates and allow everybody to implant devices. Some of our membership was upset, but what we were looking at was the reality that more and more cardiologists are going to barge ahead and do these things. If they are going to implant (the devices) let's put in some parameters. Let's put our nickel down and say, 'This is what you need to do.' "
Short of board certification, the training is designed to give cardiologists competency, Curtis says. The first training was offered last month in Miami and was attended by 246 physicians, primarily cardiologists, who will also be required to take an exam this month and be supervised by an electrophysiologist. The training course will be offered again in October, she says.
The CMS' expansion decision was based on a heart-failure study published in January's New England Journal of Medicine that found ICDs reduced mortality from cardiac arrest by 23% among patients with congestive heart failure. That population could possibly be expanded even more based on the results of a study presented last week at the Heart Rhythm Society's annual meeting in New Orleans. While CMS guidelines allow reimbursement for patients who have been diagnosed with heart failure for more than nine months, the new study found that ICDs are equally beneficial for newly diagnosed patients.
ICDs have been implanted in heart patients since the early 1980s and were initially designed for the few heart patients who had already survived cardiac arrest, Curtis says. Simply because paramedics can't respond fast enough to restore their heart rhythms, 95% of cardiac arrest victims die. Heart failure, Medicare's single largest expense, afflicts 5 million people in the U.S. with 550,000 new cases annually and contributes to as many as 300,000 deaths each year, many from sudden cardiac arrest, according to Corazon.
An ICD can literally shock the heart back to life, but "the trick is how to identify those people," Curtis says. That has resulted in a number of clinical trials that attempt to determine the population most at risk of cardiac arrest. People who have had heart attacks are clearly at risk, but only recently have the studies examined the benefits for heart failure patients who have not had a heart attack.
Business is beating strongly in electrophysiology thanks to the study showing the benefits of ICDs as a prophylactic, Curtis says. In addition, the growing popularity of cardiac resynchronization devices, also known as CRTs-which were approved by the Food and Drug Administration in 2001 and are designed to alleviate the symptoms of heart failure by re-pacing the beat of both chambers of the heart-are making electrophysiologists very busy, she says.
"That has created incredible demand for these devices," Curtis says. She predicts that because resynchronization treats the symptoms of heart failure and most heart failure patients are at risk for cardiac arrest, nearly all patients who get resynchronization devices will also be getting defibrillators, although not necessarily vice versa. She estimates that about a third of all ICD patients are also getting resynchronization.
Only one out of every 16 cardiologists is an electrophysiologist, according to Corazon. The lines are blurring between electrophysiologists and other specialties that are permitted to perform implants, but the growing complexity of the devices will make it increasingly important for physicians to have specific expertise and training in electrophysiology, Corazon says. Though the number increased 85% from 1996 to 2002, the number of board-certified electrophysiologists is expected to grow only 6% annually, making them even more in demand. Nevertheless, Burns of Corazon says he doesn't expect any turf wars to develop such as the notorious turf wars between cardiologists and radiologists.
"Electrophysiology procedures take a long time and a lot of interventional cardiologists, to quote one, say, 'It is hours of tedium, followed by minutes of excitement, followed by hours of tedium,' " Burns says. Pacemakers, which are frequently implanted by general surgeons in a procedure with a quick turnaround time, are another story, with solid profit margins, he says.
The increasing demand for ICDs could erode those healthy electrophysiology profit margins, Burns says. Medicare pays close to $40,000, but one of the costliest ICDs combined with a CRT into one device can cost as much as $39,000, and, in general, the sickest patients need the most expensive defibrillators. Prices for ICDs will inevitably decline as device costs always do, but some hospitals are deciding to refrain from offering ICD implantation, at least for now, Burns says.
Meanwhile, Johnson & Johnson's proposed acquisition of Guidant Corp., expected to close in the third quarter of this year, will reduce the number of players in the cardiology field. Electrophysiology is a new area for J&J but both companies have a prominent position in the stent market, so the acquisition should have less of an effect on electrophysiology than on interventional cardiology and the price of drug-eluting stents, Burns says.
Still, he predicts that J&J will offer hospitals deals that bundle electrophysiology products with stents. "What we had seen in terms of the Cypher (J&J's drug-eluting stent) was that J&J was looking at providing the best customers with the cutting-edge technology, which is what any business would do," Burns says. "But now they are limiting the playing field, so they have even more control over the market."
Burns recommends a "tiered approach" to building a profitable electrophysiology lab. Physicians should be part of the planning. "You really need a planned approach as to how patients will be identified and have the physicians be part of that and then have the physicians also be part of device selection," Burns says. Hospitals putting together 10-year plans should be addressing congestive heart failure patients "and part of that is making sure these devices are available," he says. Every hospital should be thinking about how to provide the service or, alternatively, how to get their patients to a center that does, he says.
"It's exciting," Burns says, "it's just that somebody has to pay for all of this."