Hospital group: Stop passing the device tax down to providers

The 2.3% excise tax on U.S. medical device sales has been in effect since Jan. 1, and hospital supply chain giant Novation claims at least one devicemaker has been passing the charge down to its customers, which flies in the face of the tax's intent, the group says.

"Novation is taking a firm position with manufacturers that the medical device tax may not be passed onto the hospital members we serve," CEO Jody Hatcher said in a statement, adding that healthcare providers are already on the line to pay $155 billion over 10 years to support the Affordable Care Act and don't have the margins to pick up the tab for the medical device industry.

The device tax is designed to bring in about $29 billion over a decade, and while the compliance structure is still a little murky, Novation says the charge was clearly not meant to burden hospitals. Hatcher said her group is going to do everything it can to shield providers from paying the device industry's share of healthcare reform.

While it's true that the tax is meant to be paid by device manufacturers, the IRS guidance doesn't specifically prohibit devicemakers from adding separate charges to their billing sheets in order to recoup the 2.3%. They can't get out of it just by raising rates, though--the feds want their cut of the listed price of a device, no matter the rebates or bulk discounts involved.

ACA proponents have made the case that healthcare reform will be a net benefit for the device industry, as the individual mandate will inject about 30 million newly insured customers into the marketplace, evening out the tax's toll. However, devicemakers take issue with that logic, saying the majority of those patients will be young and not in need of the ICDs and orthopedic implants on which the industry makes its living.

- read Novation's statement

Special Report: 5 Things You Need To Know About the Medical Device Tax

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