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Digital health reimbursement: The transforming landscape


Communication and social network technology design with a laptop computer.

Since the coronavirus became a public health emergency, digital health and telemedicine have become an increased topic of discussion. Regarding telehealth, Congress and the government have pulled out most, if not all, the obstacles for covering and reimbursing telemedicine visits, at least in the short term. In an interview, Chance Scott, a Director in life sciences at Guidehouse, talks about some of the challenges digital health innovators face including reimbursement by private plans, the impact by employer benefit design, and the future of reimbursement for other telehealth tools and digital therapeutics.

Chance Scott

The way Chance sees it, providers and patients have been the big winners from the rapid expansion of telehealth reimbursement. In March, the government broadened the array of services and codes that are reimbursed and structured them so these services are reimbursed at the same rate as they would be in a face-to-face encounter as opposed to a reduced amount. So, who are the winners and potential losers in this?

“Clearly, practitioners are seeing a boon in their ability to expand the types of revenue streams from telehealth,” said Scott. “Providers have the option to waive cost share for these virtual interactions and remote monitoring services and clearly, patients are still getting critical access to care that’s needed during the pandemic. So, I think those two sets of stakeholders have definitely been winners. From a payer standpoint, it’s unclear whether they are really a winner or loser here, but they are going to have to understand the implications around cost containment for their health plans should the pandemic continue.”

When looking at digital health more holistically commercial plans have more latitude because they’re not necessarily beholden to the dictates of Health and Human Services, Scott observed. He noted that health plans like Kaiser Permanente have created “Digital Centers of Excellence” to understand how they can standardize the way they evaluate, integrate, and pay for digital services. In September, the FDA announced one, to provide technical advice, advance best practices and reimagine digital health device oversight. 

“CMS has started the discussion, but it’s the commercial health plans that are nimbler in addressing digital access,” Scott said.

Employer wellness plans have shown an interest in adopting digital health tools that can help them keep a tighter rein on healthcare expenses and employee productivity by helping staff manage chronic conditions and help staff navigate healthcare options with greater transparency.

Scott said that when you think about indications such as diabetes, a lot of the technology aimed at diabetes management and other chronic conditions is being pushed by self-insured employers. 

“They see value in employee engagement, in productivity, in reducing their overall healthcare expenditures, particularly when they’re fully at risk for those costs. So, you see some of the existing apps today aimed at wellness, mental health, diabetes. It really is about the employer sponsoring that, ensuring that the health plan provides their employees access to these digital innovations. It’s not necessarily the payer going out in front and saying, ‘We’re going to apply this to our entire beneficiary pool today,’ because there may not be enough evidence supporting that. So, you see a lot of the employer group becoming more influential for early access to digital health tools.”

Some health insurers have rolled out programs to support self-insured employers and their own members. Earlier this year, UnitedHealth unveiled Level2, a digital health program for patients with type 2 diabetes. It uses wearable devices and coaches to help users manage their health. Blue Shield of California developed a Wellvolution program that harnesses digital health tools. 

Despite the expansion in reimbursement for telehealth in the context of Covid-19, there still have not been any concerted changes to the reimbursement model for digital health broadly, said Scott. For more novel technologies, like digital therapeutics, the expansion of telehealth doesn’t really address how other digital health services are delivered, priced, or accessed.

“For the truly game-changing benefits, there still is no codified benefit category for digital. That’s why you see Pear Therapeutics and other digital therapeutics companies trying to push legislative efforts with the Prescription Digital Therapeutics to Support Recovery Act, which was introduced in the U.S. Senate earlier this year to understand how we can provide coverage for prescription digital therapeutics.”

The Prescription Digital Therapeutics to Support Recovery Act is a bill to change the Social Security Act to support digital therapeutics. It focuses on mental health and substance abuse, given the technologies within the purview. But it would provide a precedent for how to approach reimbursement for digital therapeutics more broadly. The pathway for digital therapeutics development and drug development are similar in some ways, said Scott. 

They go through clinical trials. They’re reviewed by the FDA. They’re then approved. But drug trial clinical trials are more rigorous than those for digital therapeutics. They typically are randomized controlled trials with an “active comparator” to thousands of patients. 

An active comparator means that a known, effective treatment is compared to an experimental treatment, as opposed to a placebo. 

So, the regulatory bar for drugs is quite high compared to the regulatory bar for digital therapeutics, which may not have any active comparator. They may also be very small trials and so the rigor with which the FDA reviews those may be a bit different than how we’ve traditionally seen drugs be treated. Even if digital therapeutics secure approval from the FDA, it doesn’t mean they will see wide adoption. Insurers are a separate decision-making body that’s going to look at the clinical evidence. If the clinical evidence is much lower or less rigorous than a drug, they may decide not to cover it all. 

Scott points out that payers consider several major questions when they weigh whether or not to cover new technologies.

First: do they have to cover and pay for this? If there’s not a benefit category, they typically don’t. 

A second issue: What’s the clinical value? And do you have sufficient published evidence to prove to payers your technology has utility.

“Is it a service to a physician that is going to bill a telehealth code? Is it trying to get on to a digital formulary like the one CVS Caremark has established? Is it a piece of durable medical equipment like a VR headset or is it something so new that there needs to be a new structure created to determine how to properly reimburse for this?

“You can demonstrate reductions in cardiovascular events or things that lead to hospitalization which have a clear clinical and economic impact to the health plan. And so, do they have to cover it? If they do, how do they cover it, and is there enough evidence to convince them to cover it? And because that’s where this notion of your business model as a digital innovator is really important.

Healthcare entrepreneurs have to focus on what their business model is and be aware of the changes we are seeing to provide an infrastructure for digital health adoption. The rise of digital formularies is one example of this. They also have to consider how their business model will shape their go to market strategy. 

We’re now at a point where the increase in the number of technologies is causing the need to re-evaluate how we pay for digital innovation. Many are betting that the widespread reimbursement of telemedicine services accelerated during the pandemic will continue even after a safe and effective vaccine is available for the virus. It has forced people who had never used the technology to acquaint themselves with this form of access to healthcare. Although that is widely seen as a positive development in the push to expand coverage for novel digital health tools like digital therapeutics, clinical validation is an equally important factor in determining the future of reimbursement for these tools.


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