1. Estimates of Ophthalmic OCT Market Size and the Dramatic Reduction in Reimbursement Payments

    Estimates of Ophthalmic OCT Market Size and the Dramatic Reduction in Reimbursement Payments

    Optical coherence tomography has been an unqualified success in the area of ophthalmology.  As recently noted by OCT pioneer Dr. Carmen Puliafito, “OCT has revolutionized the treatment of eye diseases on a global basis and it is now routinely used to make clinical decisions about treating patients with blinding diseases such as macular degeneration, diabetic retinopathy, and glaucoma”.  Over the past decade the market for ophthalmic OCT systems has grown tremendously and is now over $300M/year; there are ~14 companies making ophthalmic OCT instruments and more on the way; new impressive product features continue to be rolled out; nearly every second of every day there is an ophthalmic OCT procedure being performed on a patient somewhere around the world; and worldwide reimbursement payment exceeded ~$1B in 2010.  But in 2011 in the US the reimbursement code changed and hundreds of millions of dollars in payments vanished.  This article details these estimates and speculates on the impact of the dramatic change in reimbursement.

    It is difficult to get precise data on the worldwide ophthalmic OCT system market. There are many manufacturers, some with direct sales channels, and some with sales supported with distributors that have mark-ups, there are a wide variety of models with differing capabilities, and a wide variety of price points.  A coarse estimate of the historical ophthalmic OCT system world market is shown in Figure 1.  This data was arrived at by a combination of means and represents equipment manufacturers, not end user sales which can often pay higher prices due to distributor costs.  While the exact value in 2012 is subject to some error, one thing is certain: the market has grown dramatically over the past decade and today most likely exceeds $300M/year.

     Estimated World Ophthalmic OCT System Annual Market Size

    Figure 1: Estimated World Ophthalmic OCT System Annual Market Size.

    Currently there are about 10 companies in the diagnostic ophthalmology OCT market, plus four more that are using OCT to guide laser surgical procedures in ophthalmic applications.  These include: Alcon/LenSx, Bioptigen, Canon/Optopol, Heidelberg Engineering, Nidek, OptiMedica, Optos/OTI, Optovue, Schwind, Shenzhen Moptim Imaging, Technolas Perfect Vision, Tomey, Topcon, and Zeiss.  Among the companies with leading market share are Zeiss, Optovue, Heidelberg Engineering, and Topcon.

    One method for getting ophthalmic OCT usage data for US markets is to investigate Medicare statistics.  Figures 2-5 shows Medicare statistics for three different sets of CPT codes:

    • 92235-flourescein angiography with interpretation and report
    • 92250-fundus photography with interpretation and report
    • 92132 scanning computerized ophthalmic diagnostic imaging, anterior segment, with interpretation and report, unilateral or bilateral
    • 92133 scanning computerized ophthalmic diagnostic imaging, posterior segment, with interpretation and report, unilateral or bilateral; optic nerve
    • 92134 scanning computerized ophthalmic diagnostic imaging, posterior segment, with interpretation and report, unilateral or bilateral; retina
    • 92135 scanning computerized ophthalmic diagnostic imaging, posterior segment, with interpretation and report (obsolete after 2010)

    The family of codes 92132/3/4/5 are used for OCT reimbursement.  92135 was the CPT code used for OCT service up until 2010 and while it included other non-OCT services, it was dominated by OCT usage.[1]  In 2010 CPT code 92135 was eliminated and split into new three codes: 92132 anterior segment, 92133 optic nerve, 92134 posterior segment.[1,2]  Also in that year the code was changed from allowing for separate billing of each eye to only allow billing once whether one or two eyes were scanned.  Figure 2 shows the allowed Medicare charges, Figure 3 shows the allowed Medicare services, and Figure 4 shows the effective Medicare cost/service (division of data of Figure 3 by Figure 2).  The primary reason the recorded data for the 92132/3/4/5 family of codes dropped dramatically between 2010 and 2011 is the transition from allowed billing for each eye to billing for both eyes. 

    It is interesting to speculate, but too early to tell, if the slight uptick in 2011 for fundus photography is due in part to the lowering of OCT reimbursement.  The breakdown for the 2011 data for the OCT related codes is shown in Table 1. 

    CPT Code

    Description

    Allowed Services

    Allowed Charges

    92132

    Scanning computerized ophthalmic diagnostic imaging, anterior segment, with interpretation and report, unilateral or bilateral

    30,334

    $1,098,767

    92133

    Scanning computerized ophthalmic diagnostic imaging, posterior segment, with interpretation and report, unilateral or bilateral; optic nerve

    2,144,624

    $94,148,797

    92134

    Scanning comp. ophthalmic diagnostic imaging, posterior segment, with interpretation and report, unilateral or bilateral; posterior segment

    3,835,653

    $168,871,883

    Sum

     

    6,010,610

     

    $264,119,447

     

    Table 1: Breakdown of 2011 OCT Related CPT Codes.

    Allowed Medicare Charges for Three Difference Sets of CPT Codes

    Figure 2: Allowed Medicare Charges for Three Difference Sets of CPT Codes.

    Allowed Medicare Number of Services for Three Difference Sets of CPT Codes

    Figure 3: Allowed Medicare Number of Services for Three Difference Sets of CPT Codes.

    Effective Costs for Three Difference Sets of CPT Codes.  Allowed Charges/Allowed Services

    Figure 4: Effective Costs for Three Difference Sets of CPT Codes.  Allowed Charges/Allowed Services (distinct from payments/allowed services which is slightly smaller).

    As described below, it is possible to make a coarse estimate of the number of total US OCT procedures (within Medicare plus outside Medicare).  That data is shown in Figures 5 and 6.  Figure 5 shows in 2010 there were an estimated 16.3M OCT “allowed services” in the US and in 2011 that number dropped to 10.8M.  Again, the drop was not due to fewer patients being scanned, but was related to the fact that billing was now for both eyes versus two services- one for each eye. 

    It is interesting to get an estimate of the percentage of patients having both eyes scanned vs one eye scanned in data prior to 2011.  One way to coarse estimate this is to assume a constant growth rate between 2010 and 2011. By projecting the 2000-2010 fit into 2011 and comparing that projected value to the actual value, it can be estimated that approximately 72% of the patients scanned had both eyes scanned (and billed) and 28% had one eye scanned (and one eye billed). 

    It is also interesting to estimate the total worldwide ophthalmic OCT procedures.  However, there is not readily available data showing the number of worldwide procedures or a reliable breakdown of the US vs international sales of ophthalmic OCT instruments.  A coarse assumption is simply to assume the number of world procedures in 2011 was ~2X that of the US procedures.  This approach yields a total of worldwide patient procedures in excess of 20M per year and close to one patient per second every day worldwide, a rather amazing achievement for a fairly new technology. 

    Allowed Medicare Services and Estimated Total US OCT Services.  Blue line is Medicare CPT data that includes OCT and other procedures.

    Figure 5: Allowed Medicare Services and Estimated Total US OCT Services.  Blue line is Medicare CPT data that includes OCT and other procedures.  Red line is estimated total US OCT procedures (Medicare and non-Medicare).

    Allowed Medicare Charges and Estimated Total US OCT Charges.  Red line is estimated total US OCT procedures (Medicare and non-Medicare.

    Figure 6: Allowed Medicare Charges and Estimated Total US OCT Charges.  Red line is estimated total US OCT procedures (Medicare and non-Medicare.  Blue line same as Figure 2.

    Figure 6 shows the total allowed Medicare service charges (blue line same as figure 2).  Also shown is an estimate of the total US Medicare and non-Medicare OCT service charges (red line).  In 2010 the estimated total US OCT charges were nearly $750M and a projection into 2011 would have been nearly $950M.  But due to the reimbursement change, that number was approximately $475M, a reduction of nearly $0.5B.  It should be noted that this estimate is subject to considerable error bounds since it assumes many things including growth projections and that Medicare and non-Medicare reimbursement charges and policies are similar and that is often not the case.  However, it unquestionably represents an extremely large reduction and places a significant burden on clinicians and instrument makers.

    Note that the blue lines in Figures 5 and 6 contain data extracted from the Medicare data bases and thus should be fairly accurate.  The main source of error is the fact that these CPT codes can be used for OCT and some non-OCT services.  However as discussed in [1] it is estimated that the OCT procedures dominated the services.  Estimating the total number of US OCT procedures is more complicated as private payers do not readily make their data available and it is not necessary that private payers reimburse the same way as Medicare.  In Figure 5 and 6 the same method was used to estimate total number of US OCT procedures from the CPT data as discussed in [1].  The approach used was to average data from three different ophthalmic clinics and determine what fraction of 92135 procedures were related to OCT and of that fraction what percentage was for Medicare and then extrapolate those results to estimate the ratio of total US OCT procedures from Medicare procedures.

    The dramatic reduction in reimbursement charges is partially due to the tremendous success of OCT in providing clinical value for patients and profitability to clinicians.  This led to wide spread adoption and the billing increased to the point where it caught the eyes of regulators who are trying to control healthcare costs.  The dramatic reduction of ~$300M-$500M will undoubtedly have impact on the OCT market.  It could create a dampening effect on ophthalmic revenue growth in an already crowded market with 10 companies struggling for market share and to maintain profit margins.  This may decrease the rate of new product releases.  Conversely, the 10 companies competing may continue to drive innovation in the quest to maintain or increase market share.  

    To fuel potential growth, there is still a strong opportunity in the anterior chamber (as shown in Table 1 that market is still very small compared to the potential) and the optometry market and much of the developing world still does not have access to ophthalmic OCT technology.  Furthermore, since there is strong evidence that OCT improves clinical outcomes, OCT procedures will likely continue to increase and be performed as a standard of care, even though reimbursements and the rate of return on capital (ROI) equipment for clinical practices decreased.  And even though the OCT Medicare reimbursement rate has dramatically reduced the ROI, it is still compelling for many practices.  For example, many instruments sell in the cost range ~$60k, the blended weighted reimbursement is ~$44, assuming a procedure takes 30 minutes at 8 hrs/day and 100% utilization yields revenue of ~$200k/year.  Even allowing for costs including technicians taking the exam, doctor reviews, infrastructure, cost of capital and less than 100% utilization which could take 50% or more of the revenue, still yields a very attractive ROI.  Thus OCT is a needed powerful tool in the practice and a profit center as it should be.

    There are other ways ophthalmic OCT will continue to grow.  For example both Topcon and Zeiss have OCT products that also perform fundus photography, which has a higher reimbursement.  Such an approach should have lower COGS than two separate instruments and take less floor space in the clinic.  However it is not clear that if the device performs both a fundus photo and OCT procedure on the same patient at the same setting what the reimbursement will be.  There is some indication that only the lower of the two reimbursements will be allowed.[2] 

    Other opportunities for ophthalmic OCT include integrating OCT with therapeutic procedures as OptoMedica, LenSx, Technolas Perfect Vision, and Schwind have done.  In the future OCT will also most likely be integrated with surgical microscopes and it also seems likely OCT could one day make it to primary care offices in the form of inexpensive hand-held devices to screen for eye diseases.  Recently Wal-Mart has announced some trials experimenting with using ophthalmic OCT systems in its stores for screening the public.[3]  While the business case and clinical procedure is uncertain it could lead to a very interesting result.

    There has also may be backlash against the decreasing ophthalmic OCT reimbursement.  Last year Ontario Canada reduced its ophthalmic OCT reimbursement from $63 to $25 with a maximum of four allowable exams per year.  There was significant backlash from doctors, patients and others and less than one year later Ontario increased reimbursement from $25 to $35.[4]

    In summary, the ophthalmic OCT systems market grew to over $300M/year, there are over 10 ophthalmic OCT systems vendors, the majority of the market is captured by 6 players, there is nearly one ophthalmic OCT procedure on a patient performed every second somewhere around the world, between 2010 and 2011 there was a dramatic reduction in US reimbursement payments allowed the effect of which has not fully played out, there still remain lots of opportunities for novel ophthalmic OCT products, and it is highly likely OCT will continue to be one of the main tools used in diagnostic practices.

     

    Acknowledgments:

    I would like to thank Professor James Fujimoto, Dr. David Huang, and many of the leaders of the major OCT instrument companies for very helpful discussions and edits.

    References:

    [1]       Eric Swanson and David Huang, “Ophthalmic OCT Reaches $1 Billion Per Year: But Reimbursement Clampdown Clouds Future Innovation”, www.octnews.org, July 9, 1011 and Retinal Physician, May 1st, 2011.

    [2]       Riva Lee Asbell, “CPT coding changes restrict OCT reimbursements”, Ocular Surgery News U.S. Edition, March 10, 2011.

    [3]       Eric Swanson, “Seemingly In Response to Pressure Ontario Government Increases Ophthalmic OCT Reimbursement Fee”, OCT News, November 17th, 2012.

    [4]       Mike Oliver, “University of Alabama gets $1.9 million to begin glaucoma screenings in Walmarts”, AL.com, November 16thm 2012.

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