Reimbursement Remains a Barrier to Digital Health Adoption

Digital health, or the use of technology to help enhance healthcare – from the back office to the examining room-has long been heralded as a way to help improve patient outcomes as well as lower healthcare costs. Yet, to date, digital health partnerships have not yielded as much value as anticipated. A new survey, sponsored by global law firm, Ropes & Gray LLP, and conducted by Crain’s Custom Studio, Crain’s New York Business’s content marketing division, entitled From Innovations to Solutions: Building Strategic Partnerships in an Evolving Digital Health Landscape, suggests serious disconnects between healthcare organizations and technology companies-disconnects which result in provider organizations and other life sciences companies being unable to recoup the value, and coveted payer reimbursements, they seek.

Christine Moundas, partner with Ropes & Gray’s healthcare practice group, says the law firm was inspired to conduct the survey as digital health is becoming an increasing area of interest for a wide array of their clients, ranging from healthcare providers and life sciences organizations to technology companies and private equity investors.

“It’s an area that has had a ton of movement in the past several years and we’ve now seen some very interesting new partnerships between healthcare and life sciences organizations with technology companies,” she explains. “We felt it would be a good time to step back to assess the pertinent issues surrounding digital health and how they may be affecting the industry as a whole.”

The survey, which received responses from 284 individuals representing both healthcare organizations and digital health vendors, most of whom held senior management positions, demonstrated that 60 percent of respondents felt that healthcare’s “strongly entrenched business and reimbursement models” make it difficult to bring successful digital health products to market. In addition, nearly half of the survey respondents stated technology companies do not understand the healthcare market-which also impedes that success. When asked about the greatest obstacle to pursuing digital health solutions, 18 percent selected lack of reimbursement by insurers and payer organizations – and an additional quarter of respondents said reimbursement issues also obstruct digital health partnerships.

Moundas says that many of the responses were not so surprising, given what she and other attorneys in Ropes & Gray’s Digital Health practice see on a regular basis but she said it was “heartening” to see so much consensus across the survey.

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“Respondents, regardless of industry, all circled around the same kinds of issues when they expressed their take on challenges to digital health adoption and partnerships,” she says. “They agreed the major roadblocks continue to be evidence of efficacy, meeting regulatory and compliance requirements, and data security and privacy standards. That gives us some clear takeaways on what the industry needs to work on to go forward-and what companies who are considering digital health partnerships need to think through as they structure these arrangements.”

Reimbursement issues also came up again and again as an impediment to digital health.  Moundas says while the different players in digital health may have different concerns about current reimbursement streams, they are all very interested in ways to make these kinds of initiatives provide the greatest value.

“Electronic health records were funded by the American Recovery and Reinvestment Act of 2009, which created a funding stream for providers to adopt them,” she says. “But for other digital health opportunities, ranging from health information exchanges or digital health apps, there’s not a clear path to creating a sustainable business model. And both provider organizations and technology companies are really struggling with that-and it’s an ongoing issue that will have to be addressed. Right now, we have a bit of a chicken-and-egg problem where many are nervous to get into the digital health area because they can’t make a business case with current reimbursement streams. And changing reimbursement decisions can’t happen, naturally, until there’s enough adoption to show that the value is clear.”

That’s why Moundas says it is so important for organizations across the digital health space to continue to work through the identified challenges to find a path forward for building these strategic partnerships.

“Digital health is a complex undertaking, but it is one with tremendous promise for value,” she says. “It’s where the industry is headed. So, we are advising all involved to think carefully about these challenges and obstacles and look to the successful models that are already out there, so they can find their own way forward. When these partnerships are done right, they really do have tremendous value.”

Kayt Sukel is a science and health writer based outside Houston.