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Clinical Pathways GPS

Digital Health Placement in Clinical Pathways

Authored by

Richard G Stefanacci, DO, MGH, MBA, AGSF, CMD—Column Editor1; Brian C Abraham, MPA2; Martin Culjat, PhD3


2Revenue Management Solutions, EVERSANA
Digital Medicine, EVERSANA 


Dr Stefanacci reports stock ownership in TabSafe, a medication management device. Authors report no other relevant financial relationships beyond employment by EVERSANA. 


J Clin Pathways. 2020;6(10):37-40. doi:10.25270/jcp.2020.12.00004

The acceleration of digital health adoption due to COVID-19 has been welcomed by patients, health care providers, and manufacturers, particularly as governing bodies have been slow to adapt these emerging technologies over recent years. Many digital health tools and devices have demonstrated value in improving clinical and financial outcomes yet may be exempt from regulation and/or may not be able to obtain broad reimbursement. With the rapidly growing number of these situations, clinical pathway developers have the opportunity to lead the way in efforts to weigh which of these diagnostic and treatment aids should be included in the pathways and at what point in the care journey. Use of these aids can then guide broader practice as well as regulatory and reimbursement rules and processes. 

Clinical pathways are evidence-based multidisciplinary management tools that are used to standardize care processes and improve outcomes. They have historically been built to guide the appropriate use of diagnostics and medications following approval by the Food and Drug Administration (FDA) and Centers for Medicare & Medicaid Services (CMS) coverage. However, there are many new innovative approaches to care that may fall outside of this process. Notably, many new digital health tools and devices have demonstrated value in improving clinical and financial outcomes yet may be exempt from FDA regulation and/or may not be able to obtain broad reimbursement. With a rapidly growing number of these situations, clinical pathway developers must weigh which of these diagnostic and treatment aids should be included in the pathways. 

This effort has already begun, as the responses to the COVID-19 pandemic has illustrated the broader potential for digital health technologies in protecting and promoting public and population health through the expanded use of telemedicine, as well as supporting emergency preparedness and response efforts.1 The acceleration of digital health adoption due to COVID-19 has been welcomed by patients, health care providers, and manufacturers, particularly as CMS has been slow to adapt these emerging technologies over recent years. For example, while continuous glucose monitors (CGMs) have been available since the mid-2000s, it was not until 2017 that they were covered by CMS, despite strong evidence supporting their benefits. Similarly, telemedicine visits have been utilized since the 1960s yet only began to achieve broad reimbursement in the 2010s with significant limitations to their use. The coming decade is expected to see wider adoption of digital health technologies into clinical pathways as a result of recent CMS actions spurred by the pandemic, as well as from advances by FDA in digital health, increased acceptance by private payers, and significant investment in the sector. 

The AdvaMed Center for Digital Health describes digital health technologies as “tools that facilitate the electronic or mobile collection and analysis of data used to inform health care decision-making or behaviors and to support the provision of care on a remote basis.”2 Digital health technologies can include devices with integrated software, mobile apps, sensors, and clinical decision support software, with many utilizing artificial intelligence  and advanced computing technologies to improve patient health outcomes and health care delivery. There are well over 100,000 health-related mobile applications supporting the management of clinical conditions, and this market is forecasted to grow to as much as $500 billion by 2026.3,4

In this column, we aim to help pathways stakeholders understand the clear opportunities for clinical pathways to make use of these technologies, showing the way forward for Medicare and others to integrate such tools more broadly in improving clinical and financial outcomes. Contextual considerations, such as regulations, implementation needs, and reimbursement complexities, will be discussed.

FDA Regulation

The FDA has taken several steps to advance the use of digital health technologies starting with their “Digital Health Innovation Action Plan” in 2017. In this plan, FDA outlined their efforts to foster innovation in the digital health sector while protecting public health and safety.5 Digital health products are regulated as software either “as” or “in” a medical device: “Software as a Medical Device (SaMD)”/“Software in a Medical Device (SiMD).” These include software used on a mobile platform, which FDA classifies as a mobile medical app; clinical decision support used to guide and automate decision making by health care providers; digital therapeutics that are used to treat disease remotely; and wearable devices that can help manage or monitor disease.  

Importantly, FDA has also clarified which products are not subject to regulation. While digital health products having moderate to high risk or that are making medical claims are generally regulated as class II medical devices via the 510(k) or De Novo pathways, many digital health products with low risk and that do not make medical claims are exempt from FDA marketing submissions or are considered wellness products. Other more innovative products have taken advantage of the recently created Breakthrough Devices program, which provides for expedited review by FDA as well as many additional benefits. Overall, FDA has been a leader in supporting digital health innovation and in creating a framework that allows for their introduction into clinical pathways, and CMS has yet to catch up.6 


Digital health technologies fall into somewhat of a gap from a reimbursement standpoint, as the Medicare statute does not directly address coverage of digital health technologies nor does the statute specifically limit or prohibit coverage of digital health technologies within the program’s benefit categories. As such, it is not clear how digital health technologies can be managed by Medicare. Without a specific benefit category, digital health technologies may be eligible for coverage by Medicare under existing benefit pathways for either “direct” coverage and payment, or “indirect” coverage as an allowable cost of service provision. For example, direct coverage can potentially be provided through the durable medical equipment (DME) benefit for such digital health technologies as CGMs, while indirect coverage can be provided through incident billing for remote patient monitoring (RPM) as a part of a physician visit.

Reimbursement of digital health technologies has seen the most success to date with private payers and self-insured employers. Many of these groups have begun to provide access to digital health apps for their covered lives as part of programmatic spend for disease management and employee wellness. The majority of these products are intended to facilitate self-management of expensive chronic conditions or debilitating mental health conditions, and seek outcomes such as improved quality of life, better work productivity, and reduced health care utilization. Most of these products do not make medical claims and are not subject to FDA regulatory oversight. With the explosion of such products, payers are limiting their offerings to those that can demonstrate clear health-economic benefit in commercial pilot studies, and digital formularies have emerged to vet and host these products for payers. Claims-based reimbursement of regulated digital health products by private payers has also begun on a small scale but has been held back by uncertainties with CMS coverage. 

Medicare Coverage

Medicare’s coverage for any product or procedure is based on each item or service meeting a “reasonable and necessary” threshold with the following characteristics:

  • Safe and effective
  • Not experimental or investigational
  • Appropriate, including the duration and frequency that is considered appropriate for the item or service in terms of whether it is: 
    • Furnished in accordance with accepted standards of medical practice
    • Furnished in a setting appropriate to the patient’s medical need and condition
    • Ordered and furnished by qualified personnel
    • One that meets but does not exceed the patient’s medical need

At least as beneficial as an existing and available medically appropriate alternative7

This “reasonable and necessary” criterion could be expanded to digital technologies that change provider or patient behavior and improve clinical or financial outcomes. In applying the same threshold to digital health technologies, manufacturers must demonstrate their products’ value in their ability to change behavior and improve outcomes. For example, some digital health technologies can reduce the need for hospitalization, surgery, or long-term nursing home use. These factors will impact for whom and how these technologies are covered.

DME is one benefit category under Medicare that has been considered for digital health technologies. DME coverage traditionally has applied to equipment that helps patients complete daily activities, for example, walkers, wheelchairs, oxygen tanks, ventilators, and continuous positive airway pressure machines. Medicare generally covers and pays for DME if it meets the following criteria:

  • Can withstand repeated use (generally at least 3 years)
  • Primarily and customarily serves a medical purpose
  • Generally is not useful to a person without an illness or injury
  • Can be used in the home8

One example of a digital health product that meets the CMS criteria for DME coverage is the Class II medical device, Tobii Dynavox,9 a customized computer tablet that patients use for speech generation. While Dynavox could be included in a clinical pathway for patients with amyotrophic lateral sclerosis due to its durable hardware, other digital health tools that are regulated by FDA as SaMD, software without a unique hardware component, tend to fall outside the Medicare DME criteria.

During the COVID pandemic, in 2020 Medicare has allowed for more flexibility around RPM services, such as relaxing requirements to initiate these services.10 Some of these changes are expected to remain post-pandemic and are likely to lead to increased use of these codes by manufacturers. This indirect reimbursement of devices and services that enable remote physiological monitoring of patients is for “incident to” general supervision, defined as services or supplies furnished as an integral, although incidental, part of the physician’s professional services in the course of diagnosis or treatment of an injury or illness. The use of telehealth services, which may involve “phones with video capability” during the public health crisis, has increased from about 13,000 per week prior to the public health emergency to about 2,000,000 per week in the first few months of the pandemic.11 Like RPM, telehealth reimbursement is expected to continue to see expanded use by digital health manufacturers following the public health emergency. 

Since most digital health technologies are new and have not been accounted for in CMS bundled payments like hospital inpatient diagnosis-related grouping payments or hospital outpatient ambulatory payment classifications, there are opportunities to obtain separate payments for them. CMS provides two payment adjustment pathways. These include the new technology add-on payment program as well as the transitional pass-through payment program. While this process is often described as being too complex to be worthy of the effort, with the right justification and evidence, manufacturers may achieve such payment to gain not just market entry but a solid foothold.

Applicability of Reasonable and Necessary to Digital Health Technologies

As mentioned, private payers and self-insured employers have started to embrace digital health technologies as part of programmatic spend for disease management because of the products’ benefits on clinical and financial outcomes. At-risk providers, such as accountable care organizations (ACOs), bundled payment models, and integrated health delivery systems, also have obvious incentives to utilize digital health technologies that demonstrate their ability to improve clinical and financial outcomes, and recently CMS has expanded Medicare Advantage (MA) plans’ ability to use Medicare funds to pay for these technologies. 

Through CMS expansion of its interpretation of supplemental benefits beyond traditional “primarily health related” services, many digital health technologies can now be covered by MA plans. Congress further expanded MA plan supplemental benefits under the Bipartisan Budget Act of 2018 by allowing MA plans to offer a new category of supplemental benefits for “chronically ill enrollees”.12 CMS announced that “Medicare Advantage plans can now offer supplemental benefits that are not covered under Medicare Parts A or B, if they diagnose, compensate for physical impairments, diminish the impact of injuries or health conditions, and/or reduce avoidable emergency room utilization.”13 This new statutory authority is broad regarding the clinical conditions plans for chronically ill beneficiaries and the types of supplemental benefits plans may offer, including benefits that address social determinants of health like transportation benefits. Examples that CMS gives include meal delivery, transportation for nonmedical needs like grocery shopping, and home environment services to improve members’ health or overall function as it relates to their chronic illness. Digital health technologies could be covered under this path but is dependent on each MA plan developing its own coverage criteria.


While Medicare fee-for-service may take time to broadly cover digital health technologies, the FDA, patients, managed care organizations such as MA plans, and at-risk providers like ACOs are already investing in them. As a result, there is a clear place for clinical pathways to include these technologies, guiding how to best use them along the care journey. Pathways developers can show the way forward for Medicare and others to use these technologies more broadly in improving clinical and financial outcomes. 


1. How digital health technology can help manage the coronavirus outbreak. The Medical Futurist. January 28, 2020. Accessed December 2, 2020. 

2. Modernizing Medicare coverage of digital health technologies. AdvaMed Center for Digital Health and Capview Strategies. September 2020. Accessed December 2, 2020. 

3. IQVIA Institute for Human Data Science Study: impact of digital health grows as innovation, evidence and adoption of mobile health apps accelerate. News release. IQVIA; November 7, 2017. Accessed December 2, 2020. 

4. Digital health market value to reach USD 511 billion by 2026: Acumen Research and Consulting. News release. PR Newswire; November 12, 2019. Accessed December 2, 2020. 

5. Digital Health Innovation Action Plan. Center for Devices in Radiological Health Digital Health Program, Food and Drug Administration. March 26, 2020. Accessed December 3, 2020. 

6. Breakthrough devices program. Food and Drug Administration. Updated May 16, 2019. Accessed December 2, 2020. 

7. Medicare Program Integrity Manual, CMS Publication 100-8, Ch 13, Sect 13.5.4. Revision 863, February 12, 2019. Accessed December 2, 2020. 

8. Medicare Coverage Manual, CMS Publ. 100-2, Ch 15, Sect 110.1. Accessed December 2, 2020. 

9. Devices. Tobii Dynavox. Accessed December 2, 2020.

10. FAQs on COVID-19 Medicare Fee For Service Billing. Centers for Medicare & Medicaid Services. Updated December 1, 2020. Accessed December 2, 2020.

11. Verma S. Early impact of CMS expansion of Medicare telehealth during COVID-19. Blog. Health Affairs. July 15, 2020. Accessed December 2, 2020. 

12. Social Security Administration. (n.d.). Social Security Act, Benefits and Beneficiary Protections. Section 1852 (a) Basic Benefits.(3)(D). Accessed December 2, 2020. 

13. CMS finalizes Medicare Advantage and Part D payment and policy updates to maximize competition and coverage. Press release. Centers for Medicare & Medicaid Services. April 1, 2020. Accessed December 2, 2020.

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