New CPT Codes Give Digital Therapeutics a Coverage Boost

The use of digital therapeutics (DTx) received a tentative green light from Medicare when the Center for Medicare and Medicaid Services (CMS) included six new reimbursement codes in a new category of digital health services – Remote Therapeutic Monitoring (RTM) – in the Physician Fee Schedule (PFS) proposed rule for calendar year 2022, released July 13. The codes complement existing Remote Physiological Monitoring (RPM) codes CMS created in 2019.

Although there are some inconsistencies in the rule language, this RTM addition indicates that CMS recognizes the benefit of remote monitoring and using digital health tools to improve care delivery and outcomes and reduce costs.

The path to final adoption of the proposed codes, broader Medicare coverage of DTx, and acceptance by commercial payers is not certain, but this is a significant step forward to improve access to DTx. The regulatory-approval process for DTx also remains murky.

Despite these uncertainties, DTx companies and investors are clearly undeterred. The global digital therapeutics market is projected to grow from $3.4 billion in 2021 to $13.1 billion by 2026, according to a July Markets and Markets report. And health systems are partnering with DTx companies and developing their own DTx to provide better solutions for their patients.

Medicare, typically the bellwether of coverage decisions for all payers, cannot reimburse for digital therapy products just yet because currently there is no benefit category in Medicare for DTx and establishing one requires legislation. CPT codes in the PFS proposed rule would provide clinicians with reimbursement for time spent with patients setting up DTx and monitoring data. This is an important advancement, but Congress will have to create a new Medicare benefit category to establish payment for DTx products.

In the meantime, CMS can put DTx in the durable medical equipment benefit category and use a Trump-era interim final rule that automatically grants Medicare coverage for newly approved “breakthrough” medical technologies for four years. The Medicare Coverage of Innovative Technology (MCIT) rule will not be finalized until December 15. Bipartisan legislation in the House has been introduced that would establish the process for four-year approval for “breakthroughs” in law. Broader telehealth bills introduced in Congress also would expand Medicare coverage for DTx.

DTx coverage for seniors can expand more quickly through the Medicare Advantage program that has more flexibility than traditional Medicare to adopt innovative care models and where managed care plans are eager to do so when modalities demonstrate improved patient experience and outcomes.

State Medicaid programs have embraced DTx. States must get the OK from CMS to provide new benefit services to Medicaid beneficiaries so several states have developed transparent, evidence-based, burden-of-proof processes to satisfy CMS coverage-determination tests and secure approval for DTx.

Commercial insurers have been more receptive to covering DTx, especially in pay-for-performance arrangements, and many large self-insured employers shop for effective DTx to provide employees and their families with tools to better manage chronic conditions.

The optimal entry point for DTx coverage and reimbursement in the near term is likely pharmacy benefit managers, writes Nisarg Patel of Bessemer Venture Partners in a HealthAffairs blog. In 2019, ExpressScripts and CVS Caremark each announced digital formularies for DTx products that the companies fully vet for clinical effectiveness, usability, security and financial value. The formularies help their employers and health plans find DTx products that best fit their beneficiaries’ needs.

Finally, strong consumer demand will continue to propel expanded coverage. Consumer health apps are the most widely available and used digital tool right now. In a recent Morning Consult poll, 73% of U.S. adults said digital health tools are convenient, 60% said they are safe, and 56% said they are accurate. Ultimately, consumers will drive DTx to a prominent role in mainstream healthcare.