NuVasive’s XLIF Reviewed

Cigna is about to review its previous coverage policy for XLIF (extreme lateral interbody fusion) on December 15. It labeled the procedure as "investigational or unproven" in 2007.

That item was included on Thursday, November 23, in a research report written by Potomac Research Group Senior Analyst David Blaszczak. The report was entitled, "Coverage for NuVasive’s XLIF Appears to be Going in the Wrong Direction."

His report said recent coverage policies from Ætna, United Healthcare and Cigna were "possibly highlighting a negative trend" for NuVasive’s XLIF procedure.

XLIF Unproven/Investigational?

The Potomac report also noted that United Healthcare had deemed the XLIF procedure as an "unproven technology" this past July and that just last month, Ætna revised their clinical policy to state that the procedure is "investigational."

The markets reacted immediately and by the time NuVasive's stock stopped dropping two trading days later, the company's market cap had dropped by over $300 million dollars.

But even more important then the company’s stock price, were the questions of whether or not there would be another move to create a new CPT code for an extreme lateral interbody fusion procedure and whether or not providers had been billing properly for the procedure.

Company Conference Call

NuVasive announced on November 25 that it will host a conference call on this issue on Monday, November 30, at 5:30 p.m. ET. The conference call will include comments from management followed by a short question and answer session. The dial-in number is 877-407-4018. A live webcast of the conference call will be available online from the investor relations page of the company’s corporate website at www.nuvasive.com.

Insurers and CMS: Medically Necessary

NuVasive's lateral approach to the interbody space, XLIF, is a registered trade name and insurance companies have no nomenclature that identifies a lateral approach for payment. There is no CPT code for something called XLIF. Based on recommendations from the AMA (American Medical Association) and NASS (North American Spine Society), the lateral approach is identified as an ALIF (anterior lumbar interbody fusion) under physician CPT code 22558. Where exactly a patient's front is distinguished from their side has never been determined by code.

Blaszczak wrote that the majority of carriers are covering XLIF or consider it medically necessary. "There is no policy in Medicare at this time so all XLIF procedures are currently covered. However, recent changes among Ætna, United, and Cigna may draw interest to local Medicare medical directors."

"CMS [Centers for Medicare and Medicaid Services] has shown interest in possibly making coverage changes to spinal fusion in the past, " stated Blaszczak, a former staffer at the agency. "There was an advisory panel meeting at CMS several years ago on spinal fusion but CMS has backed off developing a national coverage decision (NCD). There are no coverage policies at CMS on the local level that address XLIF; therefore all XLIF procedures will be covered in Medicare.

Based on questions regarding possible coverage decisions last year, CMS seems to be focused more on bone morphogenetic proteins (BMP) and kyphoplasty/vertebroplasty.

Wall Street Analysts: No Near-Term Impact

In response to the Potomac report, Wells Fargo analyst Mike Matson wrote on November 20 that the three insurance carriers cite a lack of published studies comparing the safety, efficacy and learning curve of XLIF to standard approaches.

"Our checks indicate that it's unlikely that an insurer would be able to tell the difference between a true ALIF and an XLIF based on a hospital claim submission. However, insurers periodically audit hospital claims and might request a refund if hospital records revealed that ALIF procedures were actually XLIFs.”

At that point Matson believes hospitals might attempt to bill the patient. However, he thinks hospitals would be unlikely to recover the full amount. Such an ordeal could cause a hospital to stop doing XLIFs but would likely take some time to play out. As a result, Matson doesn’t expect a near-term impact on NuVasive.

Matson believes that if this proves to be a significant issue, NuVasive could work with the insurers to highlight existing data on XLIF and attempt to convince them to cover the procedure. If necessary, he says NuVasive could fund additional studies to support the XLIF (e.g., a head-to-head trial of XLIF vs. ALIF).

Joanne Wuensch, an analyst with BMO Capital wrote on November 23 that this was not a coding but a reimbursement issue since NASS had already backed the codes for reimbursement filing. Wuensch wrote that work-arounds can be dangerous and payers may eventually take legal action. She cautioned that some physicians may back away from XLIF procedures until there is clarity on the coverage side.

Good Outcomes

But that being said she noted this situation "is diametrically opposite the locus of the problem: because of the patient outcomes, physicians are increasing the use of the procedures and more companies are trying to increase their presence by providing tools for lateral access."

NuVasive's largest competitors have announced their own lateral access instrumentation plans and it is unlikely they would have made such investments if they believed reimbursement would be a problem.

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XLIF Déjà Vu

This is not the first time this issue has been raised.

This past March, Raj Denhoy, then an analyst with Thomas Weisel Partners, wrote that questions about reimbursement for the XLIF procedure had lingered.

Denhoy noted that surgeons were reimbursed, on average, about $1, 500 per procedure under existing ALIF codes. There are additional payment for implanting devices and additional levels performed. If a vascular surgeon is used, as is often the case in ALIF but rare in XLIF, the payment increases by 25%, but it must be split with each surgeon typically receiving half. "The guidelines are very explicit in how surgeons should bill for the procedures and if clinicians are coding aggressively, they are doing so at their own risk, " warned Denhoy.

XLIF takes about 30% to 50% less time than ALIF, according to Denhoy, and it is much more profitable for surgeons to perform XLIF. "Where this could be a concern, " continued Denhoy, "is if there was a move to change the codes so that XLIF received its own payment level that better reflected the less time it takes to do the procedure."

There has been lots of speculation about where this will all end up for NuVasive. The Cigna meeting on December 15 may render all such speculation moot.

XLIF has lots of data showing that the procedure results in less blood loss to patients, less operating time, fewer complications, and fewer refusions. If a new CPT code were to be created, insurers could potentially lower reimbursements. This would be a perversion of the "value" philosophy recently articulate by NASS’ new president, Ray Baker, M.D., in OTW.

As we have noted here before, insurance companies are in the risk management,   not healthcare business and this may represent another example of insurers transferring risk to the hospital, patient and manufacturer.

Everyone should take a deep breath until December 15.