Medical Device Tax Belongs to Medical Device Industry, States Novation

IRVING, Texas, Jan. 23, 2013 /PRNewswire/ -- The community-based, pediatric and academic hospitals served by Novation are reporting that many are being directly billed by at least one medical device manufacturer to cover the costs associated with the Affordable Care Act's medical device tax.  But Novation, the leading health care supply chain expertise and contracting company for the members of VHA Inc., UHC, Children's Hospital Association, and Provista LLC, is taking a firm stance with suppliers who are trying to pass their medical device excise tax obligations on to hospitals. 

While the administration of the Medical Device Excise Tax is complex and still evolving, it is clear that Congress did not intend to impose this tax on hospitals.  At the onset of the Affordable Care Act (ACA), the government put in place various financing measures as a way to ensure the cost of health care reform would not add to the federal deficit.  These range from revenue-raising measures such as taxes to payment reductions such as reduced Medicare reimbursements.  Congress's intent was to evenly distribute the costs associated with providing health care services to millions of additional Americans throughout the health care industry.

Despite their slim operating margins, health care providers committed to $155 billion over 10 years.  Likewise, the pharmaceutical industry committed to $80 billion.  Medical device manufacturers, however, refused to voluntarily contribute.  As a result, the government imposed the Medical Device Tax to cover their portion.  This Tax was specifically intended to be a tax on the manufacturer.  Even then, by comparison, the Tax is anticipated to amount to roughly $20 billion over 10 years.

"Novation is taking a firm position with manufacturers that the Medical Device Tax may not be passed onto the hospital members we serve," says Jody Hatcher, President and CEO of Novation. "While most device manufacturers are taking responsibility for this Tax, there are some manufacturers attempting to pass their obligation on to hospitals.  This Tax should be the responsibility of the manufacturers, and Novation is dedicated to ensuring that member hospitals are impacted by it as little as possible."

About Novation, Winner of the Ethics Inside® Certification

Founded in 1998, Novation is the leading health care supply chain expertise and contracting company for the more than 65,000 members of VHA Inc. and UHC, two national health care alliances, Children's Hospital Association, an alliance of the nation's leading pediatric facilities, and Provista, LLC. Novation provides alliance members with sourcing services, as well as information and data services. Based in Irving, Texas, Novation develops and manages competitive contracts with more than 600 suppliers. VHA, UHC, and Provista members used Novation contracts to purchase approximately $43 billion in 2012. Novation earned the coveted Ethics Inside® Certification from Ethisphere Institute, a leading international think tank dedicated to the research and promotion of best practices in corporate ethics and compliance.  Novation was also named on Ethisphere's World's Most Ethical Companies list, and is the only company in the health care industry to earn both distinctions.  To learn more about Novation, please visit www.novationco.com and follow @NovationNews.

SOURCE Novation



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