The promise of health care reform by the incoming administration will result in significant changes; but understanding how those changes may flow through to digital health industry requires an analytic framework that addresses the complexity of that sector.
As the nation processes the surprising 2016 election results, the health care community is scrambling to understand the consequences for the health care industry. Much is at stake. While the president-elect has backed away from campaign pledges of wholesale repeal of Obamacare, Republican control of the executive and legislative branches of government raises the possibility of significant changes not only to the centerpiece of President Obama’s health care reform efforts, the Affordable Care Act (the ACA), but also to Medicare, Medicaid, the drug and device approval process and the overall health regulatory environment. Of course, the president-elect is just beginning his transition process and has yet to offer specific plans for health care reform. In addition, given that Trump has demonstrated his independence throughout the course of the campaign and in the initial stages of his transition, little can be said definitively about what the future holds for the health care legal and regulatory environment.
The impact of the Trump administration on digital health is even harder to gauge than the likely impact on the Obamacare (or what is even meant by that term). There are a few reasons for this, but most significantly the development of digital health tools is not the result of a particular policy or national health care agenda. Rather, digital health tools are the natural result of the rapid spread of information technology across every sector in our economy and of the opportunities such technology offers to engage patients, improve outcomes, change behavior and deliver a higher value to consumers, payers and providers. Accordingly, there is no central piece of legislation or policy that can be identified as the cornerstone of the development of digital health tools. Further, beside concerns expressed about safety and efficacy, there is little policy debate about the potential benefit offered by digital health tools.
The identification of Representative Tom Price as Trump’s pick to lead the US Department of Health and Human Services (HHS) has some in the health information technology community hopeful because of Price’s past support for initiatives to support the adoption of information technology tools by the health care industry. This does little, however, to help us to predict where Trump will land on significant policy changes. Certainly, we would expect Price to advise consistently with his historical support, but there is no guarantee Trump will follow this advice. And while Price will have significant ability to impact the implementation of policy, we cannot know what that might mean until the Trump administration reveals those plans.
While digital health is not directly in the crosshairs of the president-elect's pledge to repeal and replace Obamacare, and may be supported by the next secretary of the HHS, the consequences of the policy, legal and regulatory changes we can expect in the next few years could significantly impact the digital health market. Our challenge now, when the details of what we may expect in health care reform from the next administration, and in the future, when those details begin to take shape, is how to evaluate their impact on the various digital health tools that have been developed or are in the development phase.
To assist in assessing the impact on digital health of the policy initiatives of the Trump administration, we suggest that the most meaningful analytic framework is one grounded in the business cases for the development and evolution of digital health tools in the first place. There are many catalysts for the development of the many digital health tools that exist, but we have identified five main market drivers with respect to which we believe most digital health tools can be associated. We believe that assessing policy, legal and regulatory proposals from the incoming administration in light of these drivers allows for the rational analysis of the potential impact of the proposals on the digital health industry.
1. Payment and Reimbursement – The health care payment and reimbursement environment significantly impacts the digital health market because so much of the economics of health care is dependent on the third-party payment system. The linkage between the reimbursement system and the digital health industry is complex, however, and changes to the system could impact the extent and nature of digital health development.
The shift toward value, population and risk-based reimbursement models by both government and commercial payers has created an environment where the improved efficiency and quality offered by some digital health tools can make their acquisition well worth the expense. A shift away from or toward any of these models could impact the development of digital health tools by undercutting or buttressing the economic justification for provider adoption. In this regard, the exact contours of Obamacare repeal and replacement are very important.
In general, we should watch for changes that de-link or strengthen the link between reimbursement and value or population health, recognizing that these alternative payment models may be impacted differently by different changes. In this regard, we should watch for changes to the authority of the Center for Medicare and Medicaid Innovation, MACRA and the Medicare Shared Savings Program in particular. Risk-based reimbursement is likely to increase, as Republicans have generally been supportive of programs such as Medicare Advantage.
Across-the-board reimbursement rate changes could also impact the market by making digital health services more or less valuable for providers as service offerings. Direct reimbursement for certain digital health tools has expanded significantly over the years, which has helped in the development of telemedicine and other telehealth tools. Increased access to Medicare reimbursement for digital health services by modifying existing requirements (such as geographic limitations for telemedicine services) and expanding the scope of coverage to include a larger array of digital health tools could improve the market for digital health tools.
2. Consumer Demand – It is unquestionable that patients are taking charge of their own health care in unprecedented ways, resulting in increased demand for tools that help consumers more effectively engage with the health system or maintain and improve their own health. The result is a series of consumer-facing digital health tools that help consumers find health care resources to educate themselves about treatment options, monitor their health, manage disease and medications, communicate with providers and insurers, view and analyze test and treatment results and otherwise be proactive with their health care.
There are many ways that changes in federal policy could impact consumer demand. For example, changes that place more or less financial responsibility for health care costs on consumers, or that provide consumers with greater or less choice in health care options (e.g., expansion of “health savings accounts”), may impact consumer demand. If consumers are faced with the burden of more responsibility for cost, the more consumers will engage with the health care infrastructure and demand higher quality and lower cost options.
The adoption of digital health tools, both consumer facing and clinically oriented, also impact the competitive landscape among providers. Policies that create more competition among health care providers—policies that embrace high-deductible or narrow network approaches—may increase the incentive for providers to demonstrate higher quality clinical service and higher customer satisfaction. Such changes could increase provider incentive to adopt digital health tools to meet customer expectations and demands.
3. Health Care Cost & Efficiency – Digital health tools can impact a provider or payer’s bottom line by improving efficiencies. On the other hand, health information technology is a cost many systems cannot take on without assistance or incentive. Policies that address the utilization of digital health tools, such as electronic health records, can create incentives to more fully adopt or move away from digital health on the basis of the impact on the bottom line. While prescriptive regulations of this sort are not generally associated with Republican orthodoxy, we should keep in mind that it was the George W. Bush administration which pushed for the adoption of electronic health records and the meaningful use regime. In addition, existing information technology adoption incentives exist (in MACRA, for example), which could be subject to revision.
4. Regulatory Compliance – Digital health tools have also been created to service providers and insurers that need to comply with regulatory requirements such as data reporting. Digital health tools that aggregate and analyze data assist in compliance and help avoid missteps. New or eliminated regulations may affect the demand for such services including, for example, possible regulations designed to address interoperability of health information technology tools.
In additional to the specific factors noted above, a general loosening of the regulatory environment could also impact the development of the digital health market. For example, the President-elect Trump has called for reforming various functions of the FDA which could impact, ultimately, the way certain digital health tools are evaluated. Other regulatory changes—impacting data privacy and security of various types, for example—could similarly impact the ease of development, cost and ease of implementation of digital health tools.
5. Health Care Quality and Access, and the Power of Data – Many digital health tools seek to enhance the clinical quality of a health encounter, and they do so in large part by harnessing the ever-increasing volume of health-related data that is collected through a number of sources. As noted above, policies that financially reward or punish health care providers based on their clinical results, as well as consumer demand, provide an obvious, direct economic incentive to develop digital health tools. However, it is also important to look beyond the economic incentives to the general goal of increasing quality of health care—an ideal which creates the underlying market for digital health. Any number of policies that directly or indirectly affect this central tenet will have an impact on the market. For example, even with the vast amounts of data collected from various sources (including electronic health records, mobile apps, wearables and other IoT devices), the lack of interoperability between the systems storing such data provides a significant impediment to harnessing its power. Policies that open up interoperability and provide incentives for “smart” collection of data would lead to more and better digital health tools. Likewise, any changes in accreditation, licensure or other approvals that are keyed to quality or health outcomes will move the ball on this industry influencer. Closely related to quality is the issue of access; policies that address greater access to care—which are often utilized to reach consumers who might otherwise not be able to access health care services—may expand or contract the market for digital health tools.
As additional information emerges from the incoming administration, we will return to this framework to assess the new administration’s proposals possible impact on the digital health industry. We expect, as well, that as the contours of the president-elect’s health care industry policies become clearer, this framework will also become clearer. Regardless, the complexity of the health care industry and of its policy, legal and regulatory environment will require careful analysis to understand the potential impact on the digital health industry.