The change in reimbursement policies through the pandemic have made it possible to bill for services, such as virtual care, that were previously unavailable or highly restrictive to rural settings. Many digital health startups and companies see these policy shifts as an opportunity to attract new customers and potentially be reimbursed like an in-network provider.
While companies are developing different modes of care to enable better health outcomes for patients nationwide, the challenge of being reimbursed for services remains for many. Here are five reimbursement strategies to consider:
1. Work with self-insured employers
Employer group health plans are either self-insured or fully insured, which deals with whether the employer shoulders the risk of their employees’ healthcare costs. Self-insured employers are more likely to save healthcare costs because they are not bound to paying premiums; instead, they pay employee claims directly, as they occur.
Furthermore, self-insured employers have several advantages for digital health companies, such as shorter sale cycles than traditional health insurance companies, wider distribution channels through benefit brokers and a higher willingness to test products that are not necessarily backed by a long history of preexisting data.
But even if the plan seems simple, one of the most cited challenges is getting employees to use the product or service. For example, one study of a cardiovascular health app showed that mean engagement lasted only 4.1 days. If employees rarely use the intervention, it is unlikely the employer will renew the contract.
Another challenge is that the actual users of the intervention may not be the intended target audience: the highest-cost healthcare utilizers in an employer’s population. If only the healthiest employees use the solution – and employers continue to pay higher cost claims for sicker employees – the employer will look elsewhere to find a solution that can decrease overall spend.
To prevent this, companies need to know what type of product, service or program to offer to each employer based on their profile. Are you a program that provides the type of healthcare assistance that employees with frequent, expensive-to-treat diseases need, or rather a wellness benefit that would be perceived as a job perk and would most likely not be used by all employees?
2. Provide hybrid healthcare
Hybrid healthcare is a mix of telehealth and in-person visits that offers the best of both worlds. One survey conducted during the pandemic peak showed 61% of people who used virtual care were planning to use both digital and in-person visits in the future.
In-person care, although it has higher delivery costs, remains the main method of care delivery for several reasons: It is reimbursed at higher rates. It provides doctors a more comprehensive view of a patient during a physical exam, and it’s often preferred by patients accustomed to it. There is also some aspect of connection between provider and patient, and diagnostic sense of the human body, that is most present and only possible with in-person care.
However, hybrid care could bring many efficiencies to care delivery. A McKinsey analysis estimated that virtual care could handle around 20% of emergency room visits and 24% of in-person office and outpatient visits, effectively shifting the delivery burden to a lower-cost setting.
A combination of both visit types could improve operational efficiencies, boost the bottom line and create a more rewarding patient experience. For example, certain types of triage can occur virtually, which is beneficial for patients who need consultations before seeking physical care such as surgeries.
Although there are concerns with telehealth reimbursements due to the expiration of the public health emergency (PHE) declaration, important steps have already been taken in the right direction. The Biden administration recently announced that major Medicare and Medicaid telehealth flexibilities will not be affected.
Congress also acted in late 2022 to extend payment parity for some Medicare telehealth services through 2024. Further legislative developments will hopefully enable hybrid care providers to continue to improve patients’ health outcomes in both settings while being reimbursed in a more consistent way.
3. Offer at-home care
The objective of at-home care is to enable patients to have easier access to medical services such as consultations and lab investigations from their home. In the 1930s, around 40% of the patient-doctor interactions took place in patients’ homes. With the pandemic, this type of care has been revived and brought to the attention of several payers and care providers.
Although the patients that need physical care at home span different types of medical insurance and age segments, senior citizens and those with multiple chronic diseases are the most common beneficiaries. Based on a survey of physicians who treat mainly Medicare fee-for-service and Medicare Advantage patients, it was estimated that $265 billion worth of medical services could migrate from traditional medical facilities to at-home care by 2025.
Furthermore, healthcare leaders have pushed lawmakers, under the 2023 Consolidated Appropriations Act, to extend acute hospital care at-home waivers through December 2024. Many commercial payers are still testing this reimbursement model because it has the potential to decrease costs whilst providing the same level of positive health outcomes.
A lower rate of hospital readmissions is one of the elements impacted by care at home, alongside the opportunity for physicians to have a complete view of the home factors that can influence the health of a patient, including social determinants of health.
4. Promote value-based payment models
Value-based care (VBC) is a type of reimbursement model that rewards high-quality care (i.e. value) over patient volume. As such, VBC is focused on patient outcomes and reimburses providers when certain quality metrics are met, such as improving preventative care. For example, a hospital that attains its goals for immunization rates, receives positive patient feedback and obtains good scores for population health management compared to standard baselines can benefit from better reimbursement rates than typical fee-for-service payments.
VBC is an attractive avenue for seeking reimbursement as the number of Medicare beneficiaries increase and the Centers for Medicare and Medicaid Services continue to promote value-based reimbursement policies that ensure cost-effective care. In particular, Medicare Advantage (MA) should be prioritized, since enrollment has grown significantly in the past two decades, going from 19% of Medicare beneficiaries in 2007 to 48% in 2022. MA enrollment is expected to reach 60% of Medicare beneficiaries by 2028.
Although VBC models seem to have only benefits, there are also some downsides. At the top of the list is bundled payments. In a bundled payment model, all the services involved in a patient’s episode of care are paid for in one comprehensive payment, which helps to align incentives among providers to coordinate care for the patient. However, in practice, these programs can be difficult to implement and sustain by providers alone, since a considerable number of resources is needed to monitor spend and coordinate care.
Companies pursuing VBC reimbursement models will need to build a network of caregivers and health professionals who are focused on educating patients, defining clinical quality and leveraging data insights at the population health level in order to track costs and outcomes. This process will enable higher treatment quality, improved access to preventative treatments and better patient-satisfaction scores. Furthermore, companies can better justify their value to insurers and providers in terms of cost-of-care savings and diversified revenue streams respectively.
5. Attribute value to engagement
Insurers and employers want attribution models that show how different touchpoints with a program or intervention leads to either a lower cost setting, a specific care gap being closed or a better member experience.
Furthermore, when companies can tie value and outcomes to engagement levels, innovative and new pricing strategies can be leveraged to generate more revenue by taking on calculated risks. For example, some digital products now offer insurers and employers the option to contract through milestone payments. They pay a low PEPM (per engagement per month) but a high one-time payment if the vendor can assist a member with closing a care gap or completing a wellness activity.
The major challenge is understanding how each data point links together in a meaningful manner to the buyer and nudges members to complete specific health actions. More specifically, companies need to consider all the different value levers and leading indicators that generate interest for the buyer and demonstrate that the value generated from the solution is far greater than the dollars spent to implement the solution.
Nevertheless, digital health companies that can explicitly articulate and quantify how every touchpoint leads to better outcomes, savings and member experiences will have a clearer value proposition for reimbursement in the eyes of the insurer and the employer.
There are many potential avenues for digital health startups and companies to enter the healthcare market and receive reimbursement for services rendered. Whether one chooses to focus on and differentiate by providing higher quality care or insights, using alternative payment models, or offering at-home or hybrid care, one can’t go wrong – each path is ripe with possibility.
At the end of the day, across these different strategies, the object is the same: providing the best healthcare possible with the lowest cost impact and highest health outcome for patients.
About the authors
Timothy Lee is a healthcare executive advisor who works with provider groups and payers to promote value-based care and digital transformation. He received his MPH in Healthcare Policy & Management from Emory’s Rollins School of Public Health. Previously, he was a senior program manager at Elevance Health.
Dr. Liz Kwo is chief medical officer of Everly Health and a Harvard Medical School faculty lecturer. She received an MD from Harvard Medical School, an MBA from Harvard Business School and an MPH from the Harvard T.H. Chan School of Public Health.
Monique Mansoura will offer more detail during the HIMSS23 session “Leveraging Digital Health and Real-World Data to Address Emerging Health Threads and Global Health Security.” It is scheduled for Wednesday, April 19, from 2:30-4 p.m. CT in MITRE Meeting Room N227B, North Hall B.