Securing FDA regulatory approvals and navigating reimbursement pathway historically has been the twin hurdles for aspiring healthcare innovators. Innovators need to consider the reimbursement landscape in the early development phase for a novel technology to determine how the solution can be paid and deliver value. In recent times, the downward cost pressures have made reimbursement one of the more difficult and unpredictable barrier to innovation.

Healthcare Spending Overview

As of 2017, the shares of total healthcare spending are divided by the federal government (28%), state and local governments (17%), households (28%), and private business (19.9%), and other private revenues (6.8%). In terms of insurance coverage, the U.S. healthcare spending is approximately divided between Medicare (20%) and Medicaid (17%), private health insurances (34%), patient out-of-pocket (10%), and other source of funds (19%). U.S. healthcare spending by type of service is divided between hospital care (33%), physicians and clinical payments (20%), prescription drugs (10%), nursing care and continuing care facilities (5%), residential and personal care services (5%), dental services (4%), home health care (3%) and other professional services and medical products (7%).

Globally, most developed countries have single-payer system while many emerging markets still rely upon direct payments. In contrast, the U.S. domestic reimbursement landscape have a multitude of players ranging from CMS, who manages Medicare and Medicaid, to private health providers. While CMS detailed transparent policies regarding reimbursement rule-making, private insurers may ask for additional data that exceeds the CMS requirement. The scope of this overview of the reimbursement landscape will focus only on CMS. The innovator would almost always achieve reimbursement easier and faster utilizing an existing reimbursement pathway rather than pursuing a new coding, coverage, and payment decisions. The determination on whether a new technology may utilize an existing payment mechanism would depend on the nature of the new technology and detailed understanding of existing payment mechanism. The immensely fragmented domestic reimbursement landscape necessitate early attention from innovator and guidance from skilled reimbursement consultant.

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Version History

• 01.30.2019 Initial Revision.