MEDICAL DEVICES
the new AI algorithm, “who will pay for AI” is a very hard question to answer. Therefore, reimbursement is key for AI algorithm adoption as an innovative healthcare technology. The Centers for Medicare & Medicaid
Services (CMS), the largest U.S. payer, uses three systems to reimburse services. Physician office payments are paid throgh the edicare Physician Fee Schedule (MPFS), hospital outpatient services are paid through the Hospital Outpatient Prospective Payment System (HOPPS), and the hospital inpatient payments are made through the Inpatient Prospective Payment System (IPPS). In 2020, CMS enabled AI algorithm payment
through MPFS and IPPS. Within MPFS, a new CPT code valued an AI diabetic retinopathy diagnosis tool, IDx-RX. Within IPPS, Medicare provided a New Technology Add-on Payment (NTAP) for
Viz.ai, an AI stroke diagnosis and treatment algorithm. There are more technologies joined the group since then, but the number is still very limited. More have joined since, but remain few versus 521 FDA-approved products. Existing reimbursements have limitations.
For example, CPT is a non-redundant coding system, so physician work already captured in a code cannot be accounted for by another. Therefore, most AI algorithms receiving CPT codes provide analytics radiologists cannot currently perform. Regarding NTAP, hospitals only receive it when the episode of care exceeds expected costs, so AIs that decrease costs by ris stratification may not alify. Other issues are the lengthy approval process and insfficient payments. In addition of the three payments systems,
CMS released a proposed rule for the Medicare Coverage of Innovative Technology (MCIT), a pathway aiming to provide Medicare payment for breakthrough devices deemed by the FDA. A breakthrough device must meet three criteria: it must be considered new and not substantially similar to existing technologies, be inadequately paid under the current Diagnosis Related Group (DRG) system, and demonstrate substantial improvement in clinical outcomes over existing services. In January 2021, MCIT established automatic 4-year CMS coverage for any FDA-approved breakthrough device, taking effect March 15,
“Existing reimbursements have limitations. For example, CPT is a non-redundant coding system, so physician work already captured in a code cannot be accounted for by another. Therefore, most AI algorithms receiving CPT codes provide analytics radiologists cannot currently perform”
2021. However, CMS rescinded this rule in November 2021 for two primary reasons. FDA breakthrough approval relies on short studies with intermediate outcomes, and studies submitted to FDA by manufacturers for approval may not be representative of the Medicare population with complex comorbidities. Despite rescinding this rule, CMS remains committed to collaborating with the FDA on an accelerated coverage pathway, hinting at early evidence review before FDA approval and expedited Medicare coverage discussions with manufacturers. In conclusion, numerous AI-based medical
devices hold great promise for enhancing patient outcomes, but adoption remains challenging. Ultimately, direct reimbursement or a compelling business case will facilitate AI adoption in healthcare practice when those tools undeniably demonstrate value.
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