Digital Health Science and Alternative Payment Models

Digital Health Science and Alternative Payment Models

Bhawna Jha, MD, MRCP (Medical Director, UAMS, and Anya Choudhary (Pulaski Academy)

Bhawna Jha, MD, MRCP (Medical Director, UAMS, and Anya Choudhary (Pulaski Academy)

Digital health, by definition, is a discipline that utilizes technologies and digital care programs within healthcare to enhance our understanding of the health conditions and challenges faced by patients and caregivers during their journey navigating through any healthcare system. Digital healthcare has been gaining momentum over the past decade but was recently catapulted to the forefront of global attention during the pandemic. For all the right reasons - there is no point of return! The growth observed was considered faster than any movements and processes acknowledged in this domain's entire history of healthcare. Digitization not only improves access to healthcare but also positively impacts the quality of provided care, care delivery efficiencies, and convenience levels, and facilitates patient-tailored care resulting in improved patient satisfaction, and outcomes. Its multi-domain effectiveness has resulted in rapid advancements in the digital health ecosystem over the past decade, along with an explosion in the number of emerging digital health companies further compounded by investments from multiple streams including – both public and private investors.

Alternative Payment Models

Alternative Payment Models are another revolutionizing process unfolding in the healthcare arena with the potential to significantly alter the internal landscape and core fabric of payment methodology in the US healthcare system. The current fee-for-service model has been the primary payment methodology employed thus far, although as reflected in rising healthcare costs and subpar performance in patient outcomes and satisfaction, undoubtedly ineffective. Within this payment model, emphasis is placed on the volume of provided care rather than value impacting adversely on patient satisfaction and outcome scores while promoting clinical practices and behaviors to augment provider incomes.

The recent Organization for Economic Co-operation and Development (OECD) Health Statistics 2022 report was released on July 5th, 2022, as depicted below. The OECD database offers the most comprehensive comparison of health and health systems across OECD countries facilitating insights and dialogue across different countries and healthcare systems. While making such comparisons, it is prudent to acknowledge the differences in individual healthcare systems (infrastructure, stakeholders, societal expectations, etc.) and therefore innovative, successful ideas from other countries need to be tailored to respective healthcare systems before any broad-scale implementation is undertaken.

It is evident that healthcare outcomes and spending are not linearly correlated and many countries have better outcomes despite lower healthcare expenditures. Australia, Norway, and Switzerland are the top performers in the healthcare outcomes domain. However, all three have lower healthcare GDPs than the US, as seen in Exhibit 1.

In response to the above evidence and experience, Alternative Payment Models (APMs) were created with a primary focus on the value aspect of provided health care.

As per the American College of Physicians –

“APM is a new approach to paying for medical care that financially rewards clinicians for delivering high–quality, cost-effective care”

"Digitization not only improves access to healthcare but also positively impacts the quality of provided care, care delivery efficiencies, and convenience levels, and facilitates patient-tailored care resulting in improved patient satisfaction, and outcomes"

These models gained momentum fairly quickly alongside wide support from various organizations, demonstrated through Congress’ MACRA Act, which incentivized involvement in APMs. The MACRA Act was passed in 2015 and the flawed Sustainable growth rate formula was repealed creating a new framework for rewarding physicians for providing higher quality care by establishing Merit-based Incentive Payment System (MIPS) and Advanced Alternative Payment Models (AAPM).

Digital health and Alternative Payment Models

The digital health ecosystem and digital tools emerging at a faster pace have presented the potential to synchronize care delivery pathways, and patient outcomes while moving the needle toward a patient-centric system. Misalignment across the US healthcare system that has prevailed for decades with a blueprint favoring volume rather than value is currently being challenged and Alternative Payment models are being adopted by most payors. The implementation and growth of technology in healthcare have not been as advanced as its involvement in other industries and progression is required to improve efficiencies and outcomes. Lack or inadequate IT infrastructure (cost, resources, culture) to support has been one of the prominent challenges in the implementation of Value-Based Care models. However, the pandemic did expedite technological innovations exponentially with a better-defined reimbursement structure for digital health services, opening a new portal to patients and their families with promises to improve care access moving forward (5). Alternative Payment Models rest on performance-related incentive payment structures, which in turn, facilitate better outcomes regarding outcomes and quality of care while fostering fiscally responsible behavior amongst providers.

Digital health tools in the space of diagnostics are asserting their presence through popularly sported wearable medical devices. Apple heart study looked into the Apple watch’s effectiveness and accuracy in picking up irregular heart rhythm (6). This device monitors heart rhythm and alerts for any irregularities detected and is, therefore, particularly helpful in facilitating early interventions in asymptomatic, undiagnosed patients. Machine learning and artificial neural network analysis have been used for the early detection of diabetic retinopathy (7). They have also been implemented to enable continuous blood glucose monitoring to avoid hypo and hyperglycemic swings as well as related emergencies. All these devices have the potential to improve disease-specific long-term outcomes – mortality and morbidity, adding value to patient care while avoiding/reducing multiple readmissions, complications, and additional costs caused by acute and chronic care management.

Patient engagement and education directly impact compliance, another variable that could be quite powerful in promoting beneficial healthcare values while containing healthcare expenses and improving long-term outcomes. Patient-friendly apps and tools can diminish the communication gap by aligning patients' and providers' goals for better outcomes. Decision support apps assist patients with real-time knowledge of their condition’s current state while medical professionals are out of reach giving them increased confidence and involvement in their care and allowing them to seek emergency care as necessary.

Like any innovation, digital health technologies also face close inspection from regulatory bodies. In particular, questions about the product’s cost-effectiveness; and safety regulations are yet to be deciphered and established through high-quality evidence-based literature. Similarly, to propose a payment methodology in the absence or only partially available information on effectiveness and safety poses challenges for the payer to craft a methodical payment grid for these services. Strategic solutions being discussed included the development of innovation networks/hubs to expedite the launch of innovations, collaboration with regulatory agencies, professional societies, etc.


Alternative Payment Models seem to be the future given their rate of adoption across the board in healthcare at this point. While the concept of APM is undeniably more sophisticated and thoughtful, particularly in the context of patient-centered care, emphasis on outcomes, and cost containment, there are several challenges perceived and already experienced throughout its implementation. Ensuring accuracy in outcomes/performance measurement is instrumental for any APM to be successful and sustainable. Overcoming healthcare’s “substantial” lag in keeping up with technological advancements in comparison to other industries over the past several decades is the next vital step in eliminating barriers to improved patient care. However, the impressive evolution of the global digital health market is reflected in its forecasted growth rate of 17.9percent over the next decade (2021-2030), reaching a predicted US$ 767,718.9 million by 2030 (9). Digital health science can assist in redefining the importance of the value of provided care throughout the cycle of patient care and even before assuming their “patient status”. Investments and progress in digital health science are long overdue, as is the need for restructuring existing payment methodology, both of which are required for the monumental shift from a “provider centered to patient-centered care” approach.

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