Straight Talk Tuesday

It happened again this week that the manufacturer of a cellular product suggested to me that their product was so effective, there should be no problem with the hospital (wound center) purchasing it for an amount equal to, or slightly more than, the total amount Medicare reimburses in the “high APC rate” for cellular products. So, I am going to explain how this works.

The high APC rate is the Medicare allowable, of which Medicare actually pays 80%. The patient is responsible for 20%. Unless the patient has a secondary insurance, we need to assume they will not be able to pay the 20% even though by law, we must attempt to collect it. So, the hospital cannot afford to purchase a cellular product for anything more than 80% of the APC rate in which the product is designated. But, it’s more complicated than that. The facility must cover the cost of the dressings that go over the cellular product, the overhead of the center, the salary of the staff members, and all the other costs associated with keeping the doors open and providing services in the outpatient setting. Each hospital probably has a different break point for what the minimum amount is that they need to “keep” in order to provide those services, but let’s assume that it’s at least another 20% to 30% of the APC rate.

Bottom line, most hospitals cannot afford to pay more than about 40% or 50% of the total APC rate for the purchase of the cellular product without losing revenue on the application visit. (Watch out for the wage index in your area because it can have a profound effect on the bottom line). Lastly, consider that the average patient has 2.2 wounds and that whatever size of cellular product I use, I am likely going to cut it and put it on at least 2 ulcers. So, the way I approach this is by analyzing products by cost, size, and indication (where I am allowed to use them as described in the package insert). Start by reading the Local Coverage Determination for your region and go from there. However, what I can tell you is that there are at least 3 cellular products in the high APC category which are big enough to cover a total of 5 square centimeters of total wound surface area,  work VERY well to heal wounds, and cost less than 50% of the APC rate.