New Rules For Our Health’s Digital Future

Technology promises to transform healthcare. It’s redefining how we interact with, and act on, our health data, and reshaping how care is delivered and coordinated. But uptake so far has been limited, particularly among the elderly, those with chronic conditions and others who could benefit most from a better, smarter healthcare system.

To understand why, we need to look at federal reimbursement policies and their far-reaching, albeit often overlooked, influence on tech innovation.

Payment rules shape access to technology

Every year, CMS (the Centers for Medicare and Medicaid Services) develops regulations governing the payment of treatments and services provided to the one in three Americans covered by Medicare or Medicaid. They determine not only which technologies will be funded, but also how, when and at what level they will be reimbursed.

Payment matters. So to lack reimbursement is, effectively, to not exist at all.

For example, even though it’s becoming a common feature in the commercial market, telemedicine adoption in the Medicare population remains rare. CMS restricts when “e-visits” can be reimbursed — typically only if the patient is already physically present at a physician’s office or hospital, only in rural areas and only by live, two-way video.

Similarly, Medicare pays for diabetes screening and treatment, but is silent on whether evidence-based behavioral and technology-enabled interventions intended to prevent disease are reimbursable. Unsurprisingly, to date, few seniors have participated in these preventative activities.

“Of particular concern,” the agency has admitted in the past, “is the adequacy of Medicare’s payment systems in facilitating access to new technologies for Medicare beneficiaries.”

Although difficult to quantify, the downstream effects may go further than access alone. These policies also shape how entrepreneurs and investors size up market opportunities and form views on product strategy. By erecting barriers to adoption of technology, CMS could inadvertently subvert its very development.

Modernize reimbursement to promote innovation

Earlier this year, Medicare committed to moving 50 percent of total spending in the coming years to new payment models that reward value rather than volume. While it hasn’t attracted as much attention, we also urgently need new health technology to help providers, payers and patients make the transition. And CMS ought to make its payment rules more flexible to spur innovation.

A first step in this direction came with CMS’ recent rule for its bundled payment program for hip and knee replacements. Starting in April 2016, hospitals in 67 geographic areas across the country (including New York City, Miami and San Francisco) will be accountable for the costs and quality performance associated with the entire episode of care — spanning the initial hospitalization for joint replacement surgery to the 90 days following the patient’s discharge.

Technology promises to transform healthcare.

The final rule grants newfound flexibility for providers to leverage technology more directly to improve patient care. One notable change: For program participants, Medicare has agreed to lift many of its restrictions on telemedicine. Telemedicine can now be used to provide remote care in the patient’s home. And gone are the agency’s usual geographic restrictions: Patients in urban areas will qualify for telehealth services, too.

Participating hospitals will also be allowed to provide incentives, worth up to a thousand dollars per beneficiary per episode, directly to patients to improve engagement and treatment adherence. The agency singles out weight and vital-sign trackers, but providers will have the authority to decide which incentives would work best for their patients.

Equally important, the rule is likely to trigger demand for entirely new classes of technology. The most immediate need will be for administrative platforms to build episodes and monitor clinical and financial performance.

Providers will also need new tools to facilitate the sharing of health information, including electronic health records, to support care coordination. While hospitals have benefited from federal stimulus dollars to incentivize health IT adoption, post-acute care providers have generally been slower to adopt health IT systems.

More so than ever, health IT will be a “critical capability,” as the agency itself notes, for the success of all stakeholders in patient care.

Looking forward

For now, these tech-friendly provisions are limited to the joint replacement program. CMS can and should apply this flexibility to its other value-linked payment programs.

It would be difficult to overstate the long-term impact of this change. Because Medicare is the single largest payer in the country, its rules set the de facto standard for other insurers. In fact, commercial payers, including Aetna, UnitedHealth and Blue Cross Blue Shield plans, are already stepping up to meet or exceed Medicare’s targets for expanding value-based care. And many of the new technologies that are being developed will be broadly applicable across the care spectrum, regardless of payer or provider.

It’s the start of a new chapter, one that will hopefully feature better technology and better care. But to get there, we’ll first need to modernize our payment rules. Our health depends on it.