Digital health solutions are showing their capabilities and slowly being validated - insurers and consumers are willing to put their money behind them. Despite the unprecedented growth in funding of the digital health market over the past few years, reimbursement and securing revenue remain key obstacles for those trying to establish their place in the market.

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A couple of weeks ago, we looked at how insurers are joining the modern health movement with a focus on the growing trend towards value-based care models. We know that reshaping the healthcare insurance space is no mean feat, but identified some really positive steps being taken towards reimbursement of digital solutions by both new players entering the market and by some of the largest long standing insurers. We also looked at how CMS and FDA are paving the way for digital health solutions to become widely adopted and reimbursed in the US, particularly in the last year with the development of the FDA pre-cert programme and the introduction of new billing codes for remote patient monitoring from CMS.

6 key ingredients to get paid

This ever-changing reimbursement and regulatory landscape makes it considerably difficult to navigate. As discussed with digital health evangelists Brian Clancy and Ryan Lawton during our webinar on prescription and reimbursement of digital therapeutics, these are a few of the key considerations when trying to secure payment and establish a solution as part of the standard continuum of care:

*Platform Syndrome : The condition of building platforms as the default solution to every problem in digital health

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Where do we stand today and what digital health solutions are actually making money?

Telemedicine

Almost every state’s Medicaid plan specifically covers at least some telehealth services, however states vary greatly in their coverage. Medicare reimburses telemedicine services based on the current Medicare physician fee schedule, with telemedicine services reimbursed at the same rate as comparable in-person medical services. Over 30 states and the District of Columbia require that private insurers cover telemedicine the same as they cover in-person services, with most insurers outside of this covering at least some telehealth service.  

There are some limitations to CMS coverage of telemedicine. Virtual consults are only covered for physicians who have a pre-existing relationship with the patient, as opposed to the virtual consult being the first contact between the physician and the patient. The coverage is for ‘virtual check-ins’ and is intended to be used primarily to determine if the patient should schedule a more comprehensive evaluation and management service.

Employer health plans are slowly following suit - Results of the The Large Employers’ 2018 Health Care Strategy and Plan Design Survey found that five years ago, only 7% of large employers covered telemedicine visits through health insurance plans. Now, all employers (96%) will make telemedicine services available in states where it is allowed next year.

In the EU, coverage of digital health solutions varies greatly on an individual country basis. In a recent survey as part of the EU State of Play on Telemedicine Services and Uptake Recommendations Report, 55% of the countries indicated that their country has mechanisms of reimbursement, and that 80% of these are from public health insurance companies, followed by 50% from government.

We are now at the point where insurers have generated data from reimbursement of telemedicine solutions to demonstrate outcomes in terms of cost saving and reduced readmissions.

MDLive, a telehealth provider of online and on-demand healthcare delivery services and software, has been offered to self-insured members of Cigna since 2014. The global leader for strategy and business development at Cigna has publically noted the benefits of offering this service to their members -  "As a result of our partnership with MDLIVE to offer virtual visits with care providers, we have seen improved customer satisfaction, as well as a 17% decrease in total medical cost and 36% decrease in emergency department utilization for that population"

AbleTo, a platform to connect patients with a nationwide network of behavioral health providers, works with employers and national health plans to deliver their behavioral health intervention to at risk populations. AbleTo and Aetna have been working together for a number of years to help manage patients with cardiac disease and diabetes, and have been able to strike a balance between increasing patient outcomes, while also reducing the cost of care for payers. In a study published in the American Journal of Managed Care, Aetna members enrolled in an 8 week Cardiac Health Program with AbleTo and showed that participants had significantly fewer all-cause hospital admissions in 6 months and that the program resulted in an overall savings in the cost of care even after accounting for total program costs.

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Reimbursement Beyond Telemedicine

Wellpepper, Livongoand Healthloop, as well as the Connected Health Initiative, all lobbied the CMS to bring in their new billing codes for remote monitoring earlier this year. CMS is one of the biggest players and influencers in the American healthcare ecosystem, so the validation that comes from their updated Physician Fee Schedule, recognising the significant clinical and financial benefits of remote patient monitoring, will pave the way for private insurers to follow suit.

Under the new regulations, all three of these solutions are eligible for reimbursement, as well as a vast number more of remote monitoring solutions (the remote patient monitoring market is estimated to reach US$31.326 billion by the end of 2023). Physicians will now be able to bill for the time spent reviewing patient generated health data from a connected device through their programs. Digital health assets should reduce costs, make work easy but also keep doctors at work.

Digital Therapeutics - The next frontier

Digital therapeutics are a hot topic in the digital health space, but one that has yet to establish a clear reimbursement strategy. Reimbursement of these solutions is still a complicated issue, with no cookie cutter definition of how they should be covered. This slow rate of adoption is frustrating for companies developing digital therapeutics, who essentially end up lobbying to individual insurers to cover their solution and spend significant sums of money in marketing them.

In the US, there are a small number of digital therapeutics that are slowly being recognised by employer health plans as being valid interventions, particularly when it comes to chronic disease management.

For example, In March 2016, the Department of Health and Human Services announced that it would reimburse digital therapeutic programs — such as Omada Health, Canary Health, and Blue Mesa Health — for administering the Diabetes Prevention Program, a lifestyle modification program clinically proven to be more effective than drug alternatives.

WellDoc’s BlueStar is available to employees at a number of companies who offer it as a reimbursed program for their employees and their dependents with diabetes. Companies add BlueStar to their prescription benefit plans, which are managed by various health plans and pharmacy benefits companies. Pricing varies with each health plan, since it is based on negotiations with pharmacy benefits managers.

These examples demonstrate the appetite for solutions that incorporate a behavioural change intervention suitable for large patient demographics with chronic diseases.

In the EU, Germany has embraced digital therapeutics and we have seen two leading solutions securing reimbursement from large German insurers. Kaia,a digital therapeutic for chronic pain,  is currently reimbursed in Germany to about 25% of the population (mix of public and private). Tinnitracks, a digital therapeutic for tinnitus, is reimbursed by the largest statutory German health insurer, which will provide patients with a payment card that they can use to activate the app after downloading it. The treatment will run for a year, initially.

The NHS in the UK is leading the charge, and are currently covering the cost of two digital therapeutics. The NHS is funding MyCOPD licences for patients with a diagnosis of severe / very severe COPD up to a maximum of 20% of the total COPD patient population per CCG. Further to that, in September 2018 they announced that they will also cover access to Big Health’s insomnia treatment solution Sleepio. The new programme is funded by a grant from the UK's Innovation Agency to Oxford Academic Health Science Network (AHSN), part of the NHS. Under the programme, citizens will be able to download the app for free and get direct access to the solution. As founder of Big Health Peter Hames noted, this will give around 3 million people access to the program, which will begin this month in Berkshire, Buckinghamshire and Oxfordshire, and will be expanded to more parts on the South East during the year.

Challenges for Insurers

Even with these advancements, there are still a number of challenges for insurers to overcome before they can more broadly reimburse DTx:

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Paying out of Pocket

Not all digital health solutions entering the market are chasing reimbursement from insurers, and instead aim to generate money by targeting consumers directly. This can be a very challenging business model, particularly when most people don’t want to pay for healthcare services. Having said that, a number of companies have managed to crack the code and appeal to the broad consumer market, with direct to consumer wellness solutions having the most success by utilizing features such as personalisation, affordability, education and ease of use. We have also seen success with digital solutions where the offering is clearly more effective than prescription medicine (for insomnia, as an eg), and self-prescribing and purchasing a digital solution works well.

These are some of the top earning D2C digital health companies at the moment:

Fitbit- estimated annual revenue $1.3B

23andMe - estimated annual revenue $80M

Misfit - estimated annual revenue $12.2M

Headspace- estimated annual revenue $11M

Noom - estimated annual revenue $8M

*Source - Crunchbase

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Bottom Line

With two months until EOY, digital health investments for 2018 have already surpassed last years total investment of a staggering $5.7billion. With so much money being pumped into the sector, it is about time we see digital health companies earn revenue from their offerings. Despite the unprecedented growth of the digital health market over the past few years, reimbursement and securing revenue remain key obstacles for those trying to establish their place in the market.

Are you a digital health company that is currently figuring out your revenue strategy, or an insurer that is trying to understand the value proposition of such companies? Reach out to us and let us know how you are getting on.