The U.S. Food and Drug Administration’s (FDA) Breakthrough Device Designation (BDD) program holds numerous advantages for medical device manufacturers. Aside from enabling companies to engage early and often with the agency for insight into their regulatory plans, BDD provides an advantage for securing better payment under the Medicare program.

Coverage, of course, is not guaranteed based solely on BDD status. Payers require robust evidence of clinical effectiveness and medical necessity. Companies can plan ahead by considering the kind of data payers desire compared to the kind of data FDA requires when designing research studies to avoid missing critical evidence elements for either stakeholder.

Breakthrough Device Designation Overview

In 2016, Congress established the Breakthrough Device Designation Program, which was finalized in December 2018. The program provides patients and healthcare providers with timely access to new medical devices and innovations, replacing the Expedited Access Pathway established in 2015. Breakthrough devices under the program receive priority review and a possible expedited path to market. All BDD requests must be made in a separate “Q-Sub” before a marketing submission. The FDA might ask for additional information (usually within 30 days) and decide on a BDD application within 60 days. Companies can request to withdraw from the program at any time, but FDA may withdraw designation upon written notice if the BDD-awarded product is no longer eligible for the classification or the information submitted in the designation request contains an untrue statement or omits material information. Manufacturers with devices that have PMA, 510(k), or De Novo marketing submissions can submit BDD requests. Products, however, must meet the following criteria to be granted BDD:

Criterion 1: Devices must provide for more effective treatment or diagnosis of life-threatening or irreversibly debilitating human diseases or conditions.

Criterion 2: The device must meet one of the following:

• It represents breakthrough technologies
• No approved or cleared alternative exists 
• The device offers significant advantages over existing approved or cleared alternatives
• Device availability is in patients’ best interest 

It’s important to consider whether seeking BDD is worth the additional resource investment. 

BDD Can Help Secure Better Medicare Payment

Historically, there were barriers to facility adoption for promising technology due to the additional costs. In 2000, Congress mandated that Medicare establish mechanisms that would mitigate this problem and provide additional payment temporarily to address the issue. Consequently, the Centers for Medicare and Medicaid Services (CMS) established two mechanisms—one for acute care services paid under the Medicare Hospital Inpatient Prospective Payment System (IPPS), called New-Technology Add-On Payment (NTAP); and another for the Medicare Hospital Outpatient Prospective Payment System (OPPS), called Transitional Pass-Through Payment (TPT).

Depending on the targeted treatment setting, medical device companies can apply for one or both of these special incremental payments for their products. Specifics about deadlines, timelines, and requirements for a successful application for each are shown below.

To qualify for either new-technology payment, a device must meet three criteria: newness, substantial clinical improvement (SCI), and cost.

In 2020, CMS updated its NTAP and TPT approval processes by exempting BDD devices from demonstrating SCI (and also newness regarding NTAP but not TPT), as it is implicit in achieving BDD status. BDD products now have an “alternate pathway” to qualify for both NTAP and TPT. Non-BDD devices follow what is now called the “traditional pathway” and must continue to meet all three criteria (newness, SCI, and cost). Due to the exemption of some NTAP and TPT requirements, obtaining BDD is worthwhile for reimbursement reasons alone, in addition to the primary benefits of FDA fast-track review.

For NTAP, BDD exempts the device from being forced to demonstrate both newness and SCI; the most important criterion is meeting a cost test showing cases that use the device exceed a threshold above the average procedural cost within each relevant diagnosis-related group (DRG). The NTAP review cycle happens only once annually, with an October application deadline. Manufacturers can apply for NTAP in October as long as their product(s) receive FDA approval or clearance by the following May 1. If successful, NTAP will start on Oct. 1 the year after the NTAP application submission. CMS no longer considers a device procedure “new” after it has been available on the market for three years.

For TPT, BDD fulfills one out of the three criteria—SCI—but products must still prove they meet cost criteria and are considered “new,” which means they are distinct from any previously pre-existing device category. The application process for TPT occurs quarterly. A device must have FDA approval or clearance to be eligible to apply for TPT, and the process can be completed in as quickly as four months. 

Payment Calculation Details

The NTAP payment is determined on a case-by-case basis. To calculate the NTAP payment, CMS finds the difference between total costs of the hospital stay and the hospital-specific MS [Medicare Severity]-DRG payment, and then applies a decision rule:

• If the hospital costs are lower than the MS-DRG payment, there is no NTAP payment because the hospital had a positive margin and payment was not inadequate.
• If the hospital costs exceeded the MS-DRG payment, there is an NTAP payment that is the lesser of the following amounts: 65% of the new technology’s cost; or 65% of the difference between the total case cost and the MS-DRG payment. The resulting amount is the NTAP payment, which is then paid in addition to the hospital-specific MS-DRG payment. 

For TPT, the hospital payment is calculated by taking the hospital charges for the device and reducing the charges to an estimate of the hospital device costs by multiplying the charges by the hospital-specific cost to charge ratio. 

• If the corresponding CPT code is assigned a device offset (i.e., how much of the regular payment is already allocated to product costs), the device offset is subtracted from the device cost estimate. 
• The resulting amount is the TPT payment, which is paid in addition to the standard ambulatory payment classification (APC) payment. 

Both NTAP and TPT encourage facilities to adopt new technologies by allowing for additional payments for cases involving eligible new medical services or technologies, while preserving some of the incentives inherent under a prospective payment system. While NTAP and TPT do not cover all additional costs, they provide a significant incentive for hospitals to adopt new technologies. 

There are limits to NTAP’s and TPT’s scope. NTAP applies only to the inpatient setting, and TPT applies only to the hospital outpatient and ambulatory surgery center (ASC) settings. (The ASC payment is calculated similarly to that for the hospital, with a few differences.) These payment mechanisms typically apply only to Medicare cases, as commercial insurers typically have higher reimbursement rates across the board and in most cases do not recognize the need to pay NTAP or TPT.

It is important to note that both NTAP and TPT are temporary, lasting typically no less than two and no more than three years, while CMS collects data to inform a permanent payment assignment at the conclusion of the new technology period. CMS also does not guarantee coverage and categorizes NTAP and TPT as payment mechanisms—a commitment to developing strong clinical evidence is still recommended even if it’s not a requirement for the alternate pathway.

Conclusion

Medical device manufacturers should think of reimbursement, regulatory, clinical, and evidence development strategies as processes that are best undertaken in parallel as part of a multidisciplinary product and market development process, and nothing illustrates this better than NTAP and TPT, where a commitment to obtaining BDD early can provide a much easier pathway to qualifying for both of these Medicare new technology payments.

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Patricia Levy-Zuckerman has more than 20 years of experience consulting on health technology and market access issues for a wide range of drugs and devices. Prior to consulting, Levy-Zuckerman  worked in multiple relevant programs inside the federal government, starting as a Presidential Management Fellow, which allowed experience in several divisions of CMS as well as the FDA, and Capitol Hill. Prior to MCRA, Levy-Zuckerman worked at Covance Health Economics and Outcomes Services. 

Helena Kalman has experience performing coverage, coding, and payment assessments for clients, as well as working on applications for additional payment mechanisms such as TPT and NTAP. In 2024, she passed her certified professional coder certification and regularly performs coding assessments and due diligence projects. Prior to her MCRA work, Kalman worked at The Health Management Academy, a research and professional development organization for health system executives.

John McDermott has more than 30 years of experience as a market access, reimbursement, and HEOR consultant and practice leader. At MCRA, McDermott leads projects that focus on coding, coverage, payment, evidence generation, and value communication strategies. He provides guidance on Medicare and managed care payment strategies as well as on developing and executing launch plans for new products. He also works closely with commercial and clinical development teams on strategies to make clinical trials and observational research commercially compelling.