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A supply of molybdenum 99 isotopes manufactured in South Africa without bomb-usable highly enriched uranium. (U.S. National Nuclear Security Administration)

The Obama administration is moving forward with plans to modify the Medicare payment system for radiological isotopes used in diagnostic procedures despite concerns that the change would not do enough to end health care providers’ reliance on bomb-grade uranium.

Effective Jan. 1, hospitals and other medical facilities will be entitled to an additional $10 in government reimbursement for every diagnostic procedure they conduct on Medicare patients using isotopes not derived from highly enriched uranium.

The Health and Human Services Department proposed the change in July, and it has been viewed favorably by nonproliferation advocates who want to see the United States weaned off of isotopes produced with material that could be used to make a nuclear weapon if it fell into the wrong hands.

Health care industry officials, however, have argued the administration underestimates how much more it will cost to switch to producing isotopes without HEU material. The extra $10 per procedure is not likely cover the cost increase passed on health care providers, and will therefore not be enough to persuade hospitals and other medical facilities to make the switch, industry officials argued in September comments to the HHS Centers for Medicare and Medicaid Services.

In a passage buried within a 357-page notice published in the Federal Register last month, CMS officials acknowledged the additional payment might not be a great incentive. They argued, though, that they are merely looking to compensate providers who switch to non-HEU sources, not give them motivation to do so.

“We did not create an additional payment to promote the administration’s initiative to eliminate domestic reliance on [medical isotopes derived] from HEU, as that is outside the scope of” the CMS rule, the notice says. “Rather the industry had conveyed to us that this conversion to non-HEU will occur in response to U.S. strategic policy, but that cost considerations have created barriers to that movement. … Although commenters have opined that a larger payment would be a better incentive to support non-HEU conversion, the purpose of the payment is limited to mitigating any adverse impact.”

Groups such as the American Hospital Association and the American Society of Nuclear Cardiology – which represent more than 5,000 hospitals and 4,500 specialists, respectively – have said they support the CMS plan in principal, but have argued the administration has not provided enough information about how its cost estimates were calculated.

In the final rule, CMS officials said their estimates were based in part on economic analyses of the world market for technetium 99 published by the Paris-based Organization for Economic Cooperation and Development, which some industry officials have argued are not relevant to the United States because they include little information from U.S. suppliers. Technetium 99 — a product of the decay of molybdenum 99 – is the isotope commonly used in diagnostic procedures.

Administration officials argued, however, that these international studies “are pertinent to the United States because, at present, our entire supply comes from foreign sources.” According to the notice, “the fact remains that there is currently no supply available domestically. Thus, while the data we used may not reflect all of the unique market forces present in the domestic market, this data source provides the best estimation of the costs of non-HEU sources compared to HEU sources because the manufacturing steps are primarily overseas and therefore reflect the global market.”

Supplemental information industry provided to the administration did not significantly alter conclusions drawn by the international studies, the Federal Register notice says. The administration says it cannot release this information, though, because industry provided it on the condition the data remain confidential.

Andrew McKinley, associate director of health policy for the American Society of Nuclear Cardiology, told Global Security Newswire on Friday that the additional information on how the $10 figure was calculated was an improvement over the original proposal, “but not enough to make us feel satisfied at the end of the day.” Industry officials still believe costs would increase more per procedure and would have liked to see more detail about information CMS officials might have gathered from hospitals in the final rule, he said.

Another concern raised by industry groups is that, in the event of an audit, hospitals could be required to prove that a medical isotope for which they received the additional $10 credit was derived entirely from non-HEU sources. The American Hospital Association suggested the government should provide adjusted payments for lower percentages of non-HEU sources and institute a multiyear phase-in period.

The American Society of Nuclear Cardiology also encouraged a phase-in period and raised concerns about liability and an inability to prove an isotope was derived entirely from a non-HEU source might stifle efforts to convert.

Health and Human Services officials rejected the idea of adjusted payments in the notice. “Because payment must be driven by cost, a 20-percent blend would be limited to 20 percent of the $10 cost or $2, and hospitals are already concerned that the $10 additional payment is a small payment when they consider it against the effort involved in making tracking and billing changes.”

Regarding liability, CMS officials acknowledged that “there is no practical way for a hospital to prove chemically that a supply purported to be derived from a non-HEU source truly meets those requirements.

“On the other hand, the radiopharmaceutical industry is a heavily regulated industry closely monitored by the Food and Drug Administration, and it is our understanding that if a supplier indicates that a source is non-HEU, manufacturing records will be able to confirm that,” the CMS notice says. “We are confident that claims by suppliers as to the source of the [technetium 99] used can be satisfactorily audited through usual manufacturing processes without creating additional requirements for hospitals.”

McKinley, of the American Society of Nuclear Cardiology, said industry officials found the clarifying language in the final rule regarding liability to be “very helpful.” He added, though, that it remains to be seen how such verification will take place in practice.

Nonproliferation experts have described the CMS proposal as a positive step toward addressing concerns that Russia – which is expected to expand medical isotope production using highly enriched uranium when a Canadian reactor goes offline in 2016 – could undercut U.S. companies developing the likely more expensive technology needed to create a steady supply of isotopes derived from non HEU material.

Issue specialists have warned, however, that the dispute between the administration and industry as to how effective the plan will be in practice underscores concerns that it on its own might not be enough to ensure a switch to non-HEU material. Legislation mandating stronger incentives – such as regulations or taxes on the sale of medical isotopes produced with highly enriched uranium – might be needed, observers have suggested.

The Senate this week approved an amendment to the 2013 defense authorization bill that would phase out U.S. exports of HEU material to foreign isotope producers and encourage domestic production without HEU material by authorizing the U.S. government to engage in some cost-sharing with potential domestic firms. The legislation does not address the potential for Russia to undercut the market.

Story by Douglas P. Guarino, courtesy of Global Security Newswire.

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