Two ways Medicare pays for digital health tools

By Jonah Comstock
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JONAH_COMSTOCK_HEADSHOTThis month, Medicare of more than 2,000 hospitals losing up to 2 percent of their funding for failing to sufficiently reduce readmissions. Next year, those penalties can rise even higher.

As troubling as this can be for hospitals, it should be good news for mobile health entrepreneurs, as the wake up call may drive hospitals to explore technology like telehealth, remote patient monitoring, or apps or text message services for people living with chronic diseases. To reduce readmissions, doctors need to find ways to extend care outside the hospital -- and those ways are being pioneered by mobile health companies.

Even as efficacy data for these methods builds through initiatives like the Scripps Wired for Health trial, hospitals still face a challenge in implementing the technology. Ironically, the challenge comes from the same source that's brow-beating them into reducing readmissions: Medicare.

According to Jonathan Linkous, president of the American Telemedicine Association, Medicare still generally won't reimburse hospitals or caregivers for home-based remote patient monitoring in most cases, or at least doesn't provide codes that make that reimbursement easy to secure. He pointed out the seeming contradiction in the two policies. Even though reimbursing for more home care technology could lead to the reductions in readmissions, those two programs are handled by two different departments within CMS -- departments which don't appear to be communicating as well as they could.

Chris Bergstrom, chief commercial and strategy officer at WellDoc, maker of the BlueStar diabetes management technology that recently made headlines for being paid for by some private payers, says reimbursement does exist for mobile health, companies just have to use older, existing CPT codes. BlueStar, however, doesn't yet have reimbursement from Medicare either.

"I never foresee a day where there's 'Part M' and we just reimburse for mobile health," he told Babyforyou.net.ua. "It's about fitting in to the existing structures. ... If your product has been deemed by the FDA to be a medical device, there's no real reason you can't go through a traditional medical device reimbursement path."

Linkous says Medicare is moving away from reimbursement entirely as it moves toward accountable care and encouraging hospitals to pay doctors based on outcomes, not time spent. Rewarding or punishing hospitals based on the extent to which they reduce readmissions allows hospitals a lot more freedom to use whatever technology gets the job done. Linkous says the next policy push for the ATA, which is de-emphasizing its longtime efforts to secure reimbursement for telehealth technology, will be for a model where hospitals can also share in the savings when they successfully reduce readmissions. This method, sometimes called "bundled payments," has already been tried in some limited Medicare pilots.

A shift away from reimbursement thinking could mean a big change to how the industry operates. Reimbursement has long been regarded as something of a Holy Grail for app and device developers, because it allows them to build for customers (healthcare providers) who can purchase based on the product's merits without worry about the cost. Under a bundle system, developers will still have to demonstrate results, but rather than having to demonstrate them once, to Medicare, they'll have to convince each new customer their tech is really worth the cost. The difference for providers, on the other hand, is between guaranteed reimbursement for an approved technology, and speculative savings that would be generated only if that technology lives up to its promises.

"From the perspective of a hospital, it's not fundamentally different from the way they've looked at it always, it's just more magnified," Bergstrom said. "They need to be better business people than they were. Medical supply companies have always sold with value propositions with things that relate to the hospitals' bottom line. Digital health has a good story to tell for continuing that saga and saying, 'Hey, I believe if you use our product we can reduce readmits'."

In many ways, reimbursement and shared savings represent two different ways of thinking about Medicare payments, and two different approaches for creators of digital health technology. For a while, at least, those creators can try to have their cake and eat it too, seeking reimbursement using old codes while also promising to help hospitals reduce readmissions and avoid Medicare penalties.

"I'm really bullish and excited on healthcare," Bergstrom said. "We are in a change at least as dramatic as when Medicare was being created. I'm shocked and impressed that our government is tackling it with some common sense -- rewarding people for delivering what we want, not for using products for the sake of using products."

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