Why Insurers Struggle with New Medical Tech

Insurance is becoming the (silent) bottleneck for AI-driven medtech innovation. Groundbreaking AI features in medical devices face an uphill battle in scaling if insurers won’t cover them. Despite noteworthy advances in technology, I’ve seen early-stage founders frustrated by the lack of reimbursement. 💡 Case in point: CMS still doesn’t have specific provisions for AI. Currently, CMS evaluates AI-enabled medical devices on a case-by-case basis for reimbursement. As a result, companies are forced to navigate workarounds like Medicare’s New Technology Add-on Payments pathway – an imperfect solution. Based on prior experience and now working alongside medtech CEOs and founders, I’ve learned that solving problems isn’t just about the tech unfortunately. 🌟 It’s about aligning with payers importantly, demonstrating clinical efficacy, and ensuring AI tools deliver measurable value, namely ROI both from both a clinical/outcomes standpoint and financial standpoint. The question many times today is not “Can we build it?” It’s “Will anyone pay for it?” How are you preparing to tackle the payment/reimbursement hurdles for AI in medtech?

The biggest barrier to adoption and threat to the future of digital health? Reimbursement. No matter how great your idea, how big a problem it solves, or how great an experience it delivers, at some point, somebody must be willing to pay for it. D2C is difficult, limits your customer base, and doesn't support health equity. Selling to providers is challenging without a clear ROI (not to mention workflow issues). Overhead costs are rising and reimbursement from traditional care delivery is going down. The appetite for additional costs without additional revenue generation is low. VBC may help alleviate some of these concerns -- if it ever becomes widespread. Employers have been a popular target of digital health companies, but there is evidence that they are experiencing solution fatigue and are increasingly wary of fragmentation and lack of evidence. That leaves the government and insurers to take up the cause. CMS has shown some willingness to support digital health solutions with the addition of RPM/RTM codes. Commercial insurers have been less supportive without consensus on what gets covered and by whom. Defining the value proposition of digital health solutions is still a work in progress. For better or worse, most care is still delivered in a FFS system that depends on CPT codes for reimbursement. This is not an ideal situation for tech solutions that are aimed at making care more efficient, comprehensive, accessible, and patient-friendly. Digital health may never fulfill its potential if sustainable payment mechanisms never materialize. The AMA and greater med tech community believe there is a place for health tech in the future of care delivery -- but do payors? Of course, it's a two-way street. Digital health companies must prove their ROI both financially and clinically -- not an easy feat. Fragmented point solutions with spurious value propositions supported by flimsy white papers simply aren't going to cut it going forward. But we can't expect to have all the answers right away. It's going to take iteration, patience, and collaboration between health tech companies, CMS, and insurers. Engaging doctors and patients is paramount too. Health tech should support traditional care, not seek to replace it. Somewhere there's a sweet spot where tech and medicine come together to build something that's worth paying for. I'm not sure we've found that sweet spot yet. It'll be the right blend of old and new and will require re-thinking care delivery in a way that the traditional system may not be quite ready to embrace. Is it worth pursuing? I think so. But little happens sustainably in healthcare without convincing someone to pay for it. And that question remains in doubt. #medicine #healthcare #healthtech #digitalhealth #healthcaretechnology #healthcareinnovation #health

When people ask me what makes healthcare unique, I start with a simple truth: it has the highest stakeholder density of any industry. Low stakeholder density: buying a pair of shoes. The buyer, payer, and user are the same. High stakeholder density: adopting a medical device. Physicians have clinical agency but little budget authority. Supply chain and admins have purchasing power but never use the product. Insurers and employers decide coverage but never touch the device. Patients experience the outcome but rarely drive the transaction. Each sees value differently. That’s why I use the term “jumping stakeholders.” Here’s the market today, starting inside the hospital and moving outward. Supply chain leaders are now the final gatekeepers on more than 70% of large purchases, according to GHX. At the next layer, Bain & Company reports that 60% of hospital purchasing decisions are now committee-based, not physician-driven. And moving further outward, Deloitte shows that payers and employers influence nearly 80% of patient access to new technologies. It’s why a lot of MedTech innovation starts first with reimbursement, then drills inward; but jumping stakeholders is challenging. Sales 101 is “Get to the decision-maker.” In healthcare, the trick is — there isn’t one. There’s just a decision makers for that part of the process. Let’s try and simplify this a little… picture a boardroom, where every seat is filled with a stakeholder representing their own group. For decades, the physician ran the room. If the doctor wanted it, the hospital bought it. Today physicians still have agency, but that doesn’t mean purchasing power. Inside hospitals, supply chain and finance committees chair the boardroom but outside, it’s the payers that hold the real power. And in all of this is the patient, living with the outcome, but with little control. Everyone is a stakeholder. The best MedTech companies — and the best people — are those who jump stakeholders effectively. Winning a department champion is good, but orchestrating an entire room is the real skill. It’s like a republic — each representative speaking for their constituents. Your job is to decide which one can truly champion your solution — and whether they have the savvy to do so. This dynamic reshaped MedTech. Prestige shifted from clinical conversations to administrative alignment. Calling on the CFO became more effective than calling on the surgeon. And strategy was split; some took the air attack — enterprise partnership — while others stayed on the ground, infantry attack, with clinicians. Then the pandemic hit, and power jumped again: supply chain, distribution, and operations took center stage. Operations became the leading value driver. MedTech had to jump stakeholders as the key question wasn’t “What’s the price?” but “Is it on contract?” — hospital speak for “Do we need to add this into our system so it can actually be ordered, billed, and paid?”