How many digital health start ups are really targeting the holy grail of Centers of Medicare and Medicaid (CMS) reimbursement dollars? It is really hard to find a good answer to that. I tried searching on Google for 2 hours after which I came to the following conclusions. Digital health start ups are either heavily slanted towards addressing consumers or towards payers & providers. Companies that target the vast gap in between these two categories are still a minority.
For example, let’s take FitBit. A great consumer oriented product helping patients achieve their health goals and eventually help them save dollars. But who pays for it? Not the commercial insurance companies such as Aetna or Cigna or the government based CMS. It is the consumers who pay for it on top of their insurance premiums. Practice Fusion is an electronic medical record company which targets physician groups, providers, and patients to meets their needs of tracking health information. Once again, neither the CMS nor the commercial insurances pay for the services.
CMS will levy hefty $300 million of fines (2% of overall net reimbursements) for more than a thousand hospitals for their high readmission rates. In addition, 1% of reimbursements will be held back for hospitals with longer than usual patient’s length of stay. I believe this is a holy grail for digital health companies to target their next big product or even package their current service offerings. Directly addressing this untapped opportunity and helping stakeholders recoup their share of reimbursement dollars is perhaps a new way to get paid from payers.
Why is this so important? First, this playing field is wide open for market entrants. Second, companies have been more interested in getting paid by the consumers and less interested in capturing reimbursement dollars. This reimbursement money, however, is going to be a big chunk of health dollars as the baby boomer population consumes healthcare. Just to demonstrate the magnitude, a large teaching facility in California had roughly around $2 Million held back from CMS last year because it had not achieved its readmission goals. Third, this is the future. With CMS trying to be wise about every single dollar it pays for, beneficiaries of such payments are going to need the help of a new generation of companies to get paid. Commercial insurance usually follows the trend of government payment mechanisms. Hence, this pot of dollars that lies at the intersection of consumers and payers & providers could soon be a viable main stream of revenue?—?for those digital health companies that want to take advantage of it.
