The fundamentals of US medical device reimbursement were explored in an online tutorial hosted by the HealthTech Activator (HTA) last month. Our latest blog, below, highlights insights from that event and a recording of the tutorial is now available on the HTA webinars page.
When NZ healthtech companies aim to sell their products in the US, a market-specific reimbursement strategy should be a critical component of planning throughout the R&D process to minimise barriers and delays. However, it can be difficult to know where to start.
Our recent online tutorial, presented by Jay Stracke of US company Billow Health LLC, examined the fundamentals of the US landscape and market access, from definitions through to a strategy framework and emerging trends.
Some of the key points from the event are below.
A definition of reimbursement in the US context:
“Reimbursement refers to the means by which healthcare providers are paid by insurance plans (i.e. payers) for providing medically necessary (i.e. covered) healthcare services to patients.”
There are three required components for reimbursement:
The US has a mix of public and private payers. About 36% of individuals primarily have public insurance (Medicare, Medicaid and military), 55% have private insurance (mostly employer insurance plans) and 9% are uninsured. For a healthcare provider to be reimbursed by a payer for using a medical device in a service, the payer must agree to cover it.
The diagram below, provided by Jay Stracke, gives a basic framework of the US healthcare system centered on the payer-provider relationship.
Although reimbursement is critical for securing patient access to a service using a new device, it does not determine the price. The price of a medical device is determined by sales to providers. Two basic strategies exist:
1) Direct sales force
2) Partnering with distributors or channel partners
Medical device suppliers must demonstrate added value to providers to be successful and drive sales. They must also demonstrate added value to payers to drive coverage.
To secure coverage and sales for a new medical device, the device must provide added value. Added value can be broken down into clinical factors (e.g. safety, efficacy and improved patient outcomes) and profitability factors (e.g. increased revenue and efficiency). As such, both clinical and economic data is important for demonstrating value, and successful companies need an evidence plan as part of a clear reimbursement strategy.
A reimbursement strategic plan is key for guiding market access for a product throughout the R&D process. A plan may include an assessment of the current environment (e.g. clinical pathway, patient profile), demonstrating added value (e.g. evidence, messaging to payers and providers), a market access plan (e.g. coverage, coding, payment, target payers), timeframes and budget.
Importantly, a reimbursement strategy is not a ‘tick the box’ exercise, and may require internal expertise or an external consultant.
The US reimbursement landscape is in flux. Bundling of reimbursement payments (e.g. per episode of care instead of per service) and incentivising provider performance (e.g. bonus pay for reducing costs below mean) is an area of ongoing development. Due to high prices and high utilisation, payment reforms aim to increase population health outcomes and patient satisfaction while reducing cost (called ‘the triple aim’).
With regards to software, specific procedural coding is mostly limited to telemedicine and remote monitoring applications. Consequently, software in healthcare is largely driven by sales to providers for increasing overall procedural efficiencies and performance. However, ongoing expansion in software for providing diagnoses and other applied applications (e.g. those using AI and machine learning), means that this is a rapidly evolving space.
For further information about reimbursement and links to resources, see the HTA Reimbursement Strategy page.
You can watch the full US medical device reimbursement tutorial on the HTA Webinars page.