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This report originally appeared in the October 2009 issue of DOTmed Business News

The medical device industry has always been regulated by Federal and State governments. The Healthcare Reform controversy is amplifying the call for increased regulation.

At the State level, there's renewed interest in regulating access to healthcare with Certificate of Need (CON) programs. The reason for CONs is purported to be for controlling the proliferation of unnecessary medical services within a State. We have a health care system that doesn't respond to increased competition with lower prices; therefore limiting the expansion of redundant health care services seems reasonable.

Unfortunately, this is not usually the rationale behind a CON. Instead, it's frequently due to a health care provider's concerns about competition. This concern leads to requests to the legislature for protection. A CON is introduced or modified to provide the desired anti-competitive environment.

Today, about half of the states have CON programs. They all begin similarly. A spending threshold amount puts the CON into play . . . exceed that threshold and start hiring lawyers and filling out paperwork. Beyond the first few pages of a CON, you may find carve outs for certain "High Tech" equipment. In the case of carve outs, even if below the CON threshold, you must apply.

On the Federal level, utilization is the key to increased regulation and regulation is exacted by the lowering of reimbursements. Does anyone look at the reason for high utilization and try to determine the benefit of the service before limiting availability? No. The goal is not to provide access to appropriate health care services. The goal is to reduce budget growth for high utilization services.

Like taxes, regulation exists on many levels. Ken Terry reported in August in BNET that underfunded the HHS would be receiving funding from fines it levies on medical offices and facilities for HIPAA violations. The more fines collected the more money available to spend. Sound like physician self-referral?

The call for increased regulation is also coming from industry. Over the past two years, COCIR, a European trade organization representing many medical device suppliers, has produced and is lobbying for the adoption of higher standards for pre-owned equipment. The "Good Refurbishment Practice Industry Standard" was published by COCIR in June. Do vendors really want more regulation? In a time of chaos in the medical device market maybe there's a method to their madness. Reading the "Industry Standard" and the executive summary that preceded it, a story emerges.

Three major OEMs are named as supporters of the program to produce the self proclaimed Industry Standard. What do the OEMs gain from more regulation? Is it access to markets, elimination of competition or maybe it's a way to influence sales by manipulating the life cycle of installed equipment? Whatever the reason I suspect they aren't acting altruistically.

There's no question medical device regulation is needed in thoughtful moderation. Time will tell us the outcome from today's decisions. However, history teaches us the consequence of regulation is almost always unanticipated.

Wayne Webster is a consultant in Medical Imaging Business Development. You can send your comments or questions to W.Webster@Proactics.net.