The question of who should pay for technology advancements like artificial intelligence in the health care industry is a tricky one. When thinking about AI-enabled software, it all depends on what the software does and the benefits of using the software. There are many use cases for AI-enabled software outside of directly treating patients, including inventory management, nurse scheduling, and drug discovery — and that’s just to name a few applications. It is clear who pays for those types of software programs: pharmaceutical companies might pay for drug discovery and hospital, or clinic operations might pay for inventory management and nurse scheduling. It’s when dealing with FDA cleared and/or HIPAA compliant software that is used directly in patient care that makes “Who Should Pay” a tricky question.

Medicare and Private Payer Reimbursement

BrainCheck’s AI-enabled software shifts dementia screening exams out of expensive, scarce specialist clinics and into the easier to access, more prevalent primary care clinics. They have digitized the standard dementia screening exams into a gamified app that is typically administered by a medical assistant at a primary care clinic. The digitized test takes 5-10 minutes for the patient to complete and in addition to detecting early signs of dementia, also provides metrics on someone’s brain health. Much like a blood test, the BrainCheck test can be taken yearly or biannually and compared over time. This is important for disease trajectory and whether certain medical interventions are working, such as medication efficacy.

Around 60% of dementia cases go undiagnosed, and the World-Wide FINGERS organization for the prevention of cognitive impairment and dementia states 40% of dementia cases are preventable through lifestyle behavior modifications. Unfortunately, many people don’t make an appointment with a neurologist until their memory loss starts affecting their daily life. There are many reasons for this, including months-long waiting lists for a neurologist, more costly than primary care, and are scarce enough that people in rural areas may not be within easy travel distance. A neurology appointment is also an additional medical appointment for patients, which is a big deal. It is hard for everyone to fit in all the annual health screenings advised including ophthalmology, gynecology, dermatology, colonoscopy, and mammogram, in addition to the annual physical at the primary care clinic. To fit a new neurology clinic for dementia screening, how many people have the time, transportation, money, and ability to go to one more doctor? All those barriers mean that early dementia can progress to the point where lifestyle behavior modification and even pharmaceutical intervention won’t help.

Since BrainCheck enables the dementia screening to be shifted from a neurology clinic to the primary care office, the screening can be done in a much easier way for the patient. It also creates a new revenue stream for primary care clinics. Most importantly, catching cognitive decline early at the primary care clinic can have a significant positive impact for individual patients.

The dementia screening and cognitive care platform are reimbursed by Medicare under CPT codes 96138, 96132, and 99483. BrainCheck has found that most of the major payers cover the software when medically necessary for those under Medicare age. Patients with dementia on value-based insurance plans like Medicare Advantage risk-adjust in the amount of $3,200-$4,200 per patient per year, which reflects the higher cost of care associated with dementia.

Medicare’s New Technology Add-On Payment

One example of a new type of coverage is a company in the neuro-stroke space called Viz.ai. Viz.ai has demonstrated that it can be used to quickly detect a specific type of costly and highly damaging stroke called large vessel occlusion, or LVO strokes. This software is now reimbursed by Medicare as a “New Technology Add-on Payment” when used in the ER to help diagnose suspected LVO cases. There’s a reason this is covered by Medicare. The AI software has been shown to improve patient outcomes by catching LVO strokes earlier than without the software. Their FDA cleared Viz LVO software is already being used in hospitals, and a peer reviewed study published in Interventional Cardiology in 2020 showed a 96% sensitivity and 94% specificity at identifying LVO strokes from 2,544 consecutive patients in 139 U.S. based hospitals. When dealing with LVO strokes, those few minutes count — and AI software like Viz.ai can be the difference between life, life with disability, and death. This type of software is a win-win-win for the patient, the hospital, and Medicare. The patient gets diagnosed more quickly – which leads to a faster, more targeted treatment – and this faster treatment leads to better patient outcomes. LVO strokes are eligible for a thrombectomy, which is a surgical procedure to remove a blood clot from a vein or artery. A thrombectomy is reimbursed at a much higher rate than a medically managed stroke, which is the default stroke treatment. The patient can have a significantly better outcome from the faster diagnosis and more aggressive surgical treatment, and the hospital or clinic is reimbursed more by Medicare. The better patient outcomes cost Medicare less in the longer term.

To qualify under a “New Technology Add on Payment”, the technology application must meet three criteria: the technology must be less than three years old; it must not already be adequately covered, and the technology must show a substantial clinical improvement over other products already available.

Digital Therapeutics

Prescription Digital Therapeutics, also called PDTs, are a relative newcomer to the world of health care. These are typically apps available by prescription that use CBT, cognitive behavior therapy, a gold standard when working on behavior change. Pear Therapeutics had the first PDT that cleared the FDA in 2017, and there have been several other prescription digital therapeutics that have cleared the FDA in the past 5 years. Pear’s first three cleared digital therapeutics are focused on addiction and insomnia, both of which are great candidates for CBT.

In February of 2022, CMS established reimbursement codes for Prescription Digital Behavioral Therapy, which applies to the Pear Therapeutics apps. This is a giant milestone for Prescription Digital Therapeutics and a signal that this new class of therapeutics has staying power. These apps are also covered by some employer wellness programs in addition to some employer formularies, which have a significantly larger budget than wellness.

Employer Sponsored

Chronic disease management platform companies like Omada and Livongo that focus on managing chronic conditions are typically paid for by the employer or health plan, with zero cost for the patient. The chronic condition management includes conditions that can be difficult to manage like hypertension and diabetes. Employers know that by helping their employees manage their health conditions, they can reduce healthcvare costs while improving employee productivity. Major health plans also know that helping patients manage expensive chronic conditions like diabetes can result in lower costs for treating that patient. Omada does have some self-pay clients that aren’t covered by an employer insurance plan for $520 for 4 months then $20/month.

The question of Who Pays for technology advancements is a tricky one that will continue to change over time as more innovations intersect healthcare.

Robin Farmanfarmaian is a Silicon Valley-based professional speaker and entrepreneur working in cutting-edge tech poised to impact 100M people or more. Robin has been involved with over 20 early-stage biotech and healthcare startups from curing cancer to medical devices and digital health. With over 180 speaking engagements in 15 countries, she educates audiences on many aspects of technology intersecting healthcare, including artificial intelligence and the shift in healthcare delivery to the patient’s home. She has written 4 books, including “The Patient as CEO: How Technology Empowers the Healthcare Consumer” and most recently “How AI Can Democratize Healthcare: The Rise in Digital Care”.