Medical Device Tax Next Steps

By AHRMM

AHRMM Member Advisory: Medical Device Tax Next Steps

Background: The medical device excise tax is a feature of the Affordable Care Act. It was implemented by the IRS as of January 1, 2013. The 2.3 percent tax is expected to provide an estimated $20 billion in tax revenues over 10 years to help defray the cost of providing health insurance coverage to some 32 million Americans. 

Nearly all in the healthcare field agreed to make financial contributions to expand healthcare coverage. The medical device industry’s contribution (the tax) was substantially less than that of providers or the pharmaceutical industry, for example.

It was hoped that the medical device industry would absorb the tax itself instead of passing it on to customers in the form of higher prices or reduced services. We have learned that some in this industry are passing the tax on to customers.

We believe it is important for customers, who are AHRMM members, to be knowledgeable about the tax and how the medical device industry is reacting to the tax. Using the framework of AHRMM’s Cost, Quality, and Outcomes (CQO) Movement, we will be launching a number of efforts, some of which bear directly on this issue:


Programs

Share your observations with us: Please share directly with us the trends you are observing. Are you observing price increases directly related to the medical device tax and how are they being implemented? For example, do invoices reflect the tax or are service reductions directly related to the tax? You can share those observations with us at AHRMMCQO@aha.org.

Keep your senior leadership aware of important developments: Ensure that senior leadership is aware of how the medical device tax is impacting your organization’s bottom line. Discuss with them how best to deal with any tax-related price increases with the manufacturer. 

Share successful strategies to contain costs: Share examples of how you’ve been able to contain costs by better managing your organization’s supply chain. Think broadly: Any areas, including implementing global standards*, reducing overhead expenses, collaborating with manufacturers, or avoiding tax pass-throughs, where you’ve been able to reduce costs and improve efficiencies are good candidates to share. You can share those with us at AHRMMCQO@aha.org.

Educating AHRMM’s Membership: Do you know subject matter experts who could help educate the AHRMM membership? Do you have examples of how you or others have been able to work toward the ACA goals of reducing costs and improving patient care by better managing your organization’s supply chain? Expert recommendations and examples can be shared with us at AHRMMCQO@aha.org.


*McKinsey & Company, Strength in unity: The promise of global standards in healthcare, October 2012.

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