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Three Digital Health Trends Affecting Investors in 2021

Private equity deal volume hit a low in the first half of 2020 as the pandemic slowed the US and global economies. But toward the end of the year, deals began picking back up, particularly in the digital health space.

COVID-19 forced healthcare providers to shift from in-person to virtual care, and technology was the vehicle to make that switch possible. Investors noticed, and more deals focused on companies specializing in telehealth, remote patient monitoring and other technology platforms that facilitate communication among specialists.

Expect this trend to continue in 2021, and keep these three factors in mind when evaluating the digital health landscape.

Easing of Laws and Regulations Surrounding Telehealth and Digital Health

Both telehealth and digital health are highly regulated, as every state has laws and regulations that govern how care is provided virtually and how those services are billed. In response to the pandemic, we’ve seen flexibility with these laws and regulations, and the Biden administration has signaled that it might make some flexibilities permanent.

Investment opportunities will likely increase as a result of the Biden administration’s willingness to lower some of the longstanding barriers to coverage and payment for virtual services, including telehealth, remote patient monitoring and other related services. That’s a positive sign for firms looking at healthcare through the lens of a technology solution.

Reallocation of Resources Due to Vaccine Rollout

Since the onset of the pandemic, labs have conducted a huge volume of testing and have had to ramp up personnel and other resources. Plus, the vast majority of COVID-19 tests must be ordered by a physician or nurse, further straining available resources.

While testing will likely continue in some capacity for a long time, the number of tests will presumably decline steadily as more people are vaccinated. That means capacity will open up, both for healthcare providers who were ordering the tests and for lab companies that were performing them. As a result, firms should begin asking themselves:

  • Where are there opportunities to shift focus and resources previously devoted to testing?
  • What other conditions lend themselves to at-home testing?
  • Where can companies shift efforts that were previously focused on reviewing orders?

Addressing Mental Health and the Other Epidemic

COVID-19 obviously emerged as the foremost health emergency of the past year. But it’s important to remember that the United States is still in the midst of an opioid addiction epidemic.

On top of that, COVID-19 has been hard on many people’s mental health. In response, many employers have made mental health a higher priority, and that trend is likely to continue, even as employees return to the workplace. In 2021, investors are likely to continue to emphasize digital health tools and service offerings that are focused on mindfulness and behavior health.

To learn more from Lisa and other thought leaders about the healthcare investing landscape heading into 2021, you can view a recording of The Deal’s webinar here.




Waiver of State Licensure Requirements for the Delivery of COVID-19 Countermeasures via Telehealth

In a fourth amendment to the March 17, 2020, Public Readiness and Emergency Preparedness Act (PREP Act), the US Department of Health and Human Services (HHS) has expanded access to COVID-19 Covered Countermeasures through telehealth and clarified the scope of liability protections provided by the PREP Act. In particular, the declaration is important to telehealth providers because it appears to preempt, under certain circumstances, state laws that have limited cross-border practice of medicine using telehealth. Healthcare providers should take note that the licensure exception and any immunity protections are limited to healthcare providers who are ordering or administering a Covered Countermeasure and there is no indication of intent to expand beyond these focused measures.

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National Telehealth Takedown Highlights Opportunity for Providers to Enhance Compliance Efforts

The US Department of Justice and the US Department of Health and Human Services Office of Inspector General recently announced a significant healthcare fraud takedown involving $4.5 billion in allegedly false and fraudulent claims involving telehealth. The allegations involved telehealth executives paying healthcare providers to order unnecessary items and services, as well as payments from durable medical equipment companies, laboratories and pharmacies for those orders. While the alleged conduct is not representative of the legitimate and crucial telehealth services offered by the vast majority of healthcare providers, the government’s continued focus on telehealth arrangements, combined with the ongoing expansion of coverage for telehealth services, provides an important opportunity for healthcare providers to evaluate their telehealth service offerings and arrangements and to further enhance their related compliance activities.

In Depth

On September 30, 2020, the US Department of Justice (DOJ) issued a press release describing the largest national healthcare fraud and opioid enforcement action in the DOJ’s history (the Takedown). The Takedown involved coordination with the US Department of Health and Human Services Office of Inspector General (OIG) and other federal and state law enforcement agencies, and resulted in cases against more than 345 defendants in 51 judicial districts. The government charged the defendants with participating in healthcare fraud schemes involving more than $6 billion in alleged losses to federal health care programs, with the vast majority of alleged losses ($4.5 billion) stemming from arrangements involving alleged “telefraud.”

According to the DOJ press release, a recently announced National Rapid Response Strike Force led the initiative focused on telehealth. The National Rapid Response Strike Force is part of the Health Care Fraud Unit of DOJ’s Criminal Division Fraud section, and its mission is to “investigate and prosecute fraud cases involving major health care providers that operate in multiple jurisdictions, including major regional health care providers operating in the Criminal-Division-led Health Care Fraud Strike Forces throughout the United States.”

Background

In recent years, the government has increasingly focused on alleged healthcare fraud schemes involving telehealth services. In connection with the Takedown, OIG issued a fact sheet and graphic highlighting the increase in “telefraud” arrangements leveraging “aggressive marketing and so-called telehealth services.” The individuals charged in the Takedown included telehealth company executives, medical providers, marketers and business owners who allegedly used telemarketing calls, direct mail, and television and internet advertisements to collect information from unsuspecting patients.

Many of the cases involved telehealth executives who allegedly paid healthcare providers to order unnecessary durable medical equipment (DME), genetic and other diagnostic testing, and medications, either without any patient interaction or with only a brief phone call. The government alleged that the arrangements involved kickbacks to telehealth executives after the DME company, laboratory or pharmacy billed Medicare or Medicaid for items and services that the government asserts were often not provided to beneficiaries or were “worthless to patients . . . and delayed their chance to seek appropriate treatment for medical complaints.”

DOJ provided a [...]

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After the Curve Podcast: Focus on Digital Health

COVID-19 has demanded a rapid shift in the world of telehealth and digital health, resulting in a global embracing of a telehealth and digital health system that is not yet fully developed. On this episode of the McDermott Health podcast, our digital health partners have joined to discuss the future of telehealth and use of digital tools to speed up care delivery and to improve outcomes in the wake of COVID-19, as well as the vital role of data readiness in reshaping the healthcare system. McDermott’s Chief Marketing Officer Leslie Tullio is joined by partners Stephen Bernstein and Lisa Mazur to examine current trends and potential changes to both telehealth as well as the broader digital health landscape, including:

  • The most impactful regulatory telehealth changes that have resulted from COVID-19
  • A look beyond telehealth to a paradigm shift in the broader digital health landscape
  • The impact that a more refined data exchange pathway could have on treatment during the next wave of COVID-19 or future pandemics
  • Meaningful collaborations that are currently happening in the digital health space
  • A look at innovations that are emerging from the demands of post-COVID-19 healthcare
  • Legal and regulatory compliance steps that still need to be taken to allow these telehealth programs to continue in the future

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The Toughest Problem Set: Navigating Regulatory and Operational Challenges on University Campuses

When the academic year ended in the spring of 2020, many US university students assumed that a return to campus would be straightforward this fall. However, it is now clear—at least in the near term—that a return to the old “normal” will not be possible. Some universities have concluded that their best course of action is to offer only distanced learning for the time being. Other universities, however, are welcoming students back onto campus, and into residence and dining halls, classrooms, labs and libraries. Each of those universities is developing its own approach to retain the benefits of on-campus student life while reducing risk to the greatest extent possible; nevertheless, some have had to adjust their plans to pivot to remote learning when faced with clusters of positive cases on campus. One thing is clear: The fall semester will be a real-time, national learning laboratory.

Because widespread, rapid testing remains unavailable in many locations, universities have had to find innovative ways to implement testing, tracing and isolation protocols to reduce the risk of transmission among students, faculty and staff. There is no one perfect protocol—all universities are in unchartered waters. But there are a few key components university administrators may want to consider and address:

  • Apps: Symptom checkers, contact tracing and other apps can be useful in identifying and focusing attention on the onset of symptoms, fostering accountability and identifying high-risk exposure. In considering whether to incorporate apps and related technologies into their back to campus plans, universities must anticipate and address considerations related to privacy, security and reporting of results, and will need to consider how such apps are hosted (for example, through Apple’s App Store) and whether any third parties will have access to the personal data collected.
  • Contact Tracing: In addition to the issues noted above, contact tracing efforts also present other challenges, including managing reliability, over/under inclusiveness and liability (for both false positives and false negatives). In addition, the effectiveness of contact tracing is closely tied to its speed and comprehensiveness; to implement a successful contact tracing program, universities will need to balance effectiveness with privacy and autonomy.
  • CLIA: The Clinical Laboratory Improvement Act (CLIA) will require that many of the tests be performed in CLIA-certified (and state-licensed, where required) space. Universities will need to consider how best to handle building out additional compliant space, creating additional “point of care” testing or specimen collection sites if needed to test students, faculty and staff where they are and validating the test(s) being offered. Tests that are not yet validated likely cannot be used to return patient-specific results that inform student and staff care or be used to prompt “official” testing.
  • FDA/Emergency Use Authorizations (EUA): In general, the Food and Drug Administration (FDA) expects developers of molecular, antigen and (in the case of test kit manufacturers) antibody tests to obtain an EUA. However, under FDA enforcement policies during the pandemic, many of these same tests—if validated and offered with appropriate agency-mandated disclaimers—can be offered before [...]

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Digital Health at Scale: The Payor Perspective

The COVID-19 pandemic has catalyzed efforts by health insurers to expand reimbursement for telehealth services and digital health tools, and develop and invest in their own digital health technology. Health insurers, who increasingly play a hybrid role of payor, innovator and provider, have a vested interest in helping consumers manage chronic diseases and engage in preventive care from home, both during the public health emergency and after.

Joined by leaders from Humana, Oscar, and Medorion, we discussed the role of health insurers in the evolving digital health market, reimbursement pathways for digital tools and innovative partnerships between technology companies and health insurers. Click here to listen to the webinar recording, and read on for highlights from the program.

PROGRAM INSIGHTS

  • COVID-19 has accelerated the integration of digital health into the traditional health insurance framework. Pre-COVID-19, health insurers were using digital health tools to help their members find providers, access care and manage health conditions. COVID-19 has hastened health plans’ efforts toward vertical integration of digital health technology. Health insurers at the forefront of this effort are focused on creating a consumer-centric, digitally enabled and fully integrated healthcare ecosystem to enhance the member experience, bend the cost curve and carve out an essential (and expanded) role for themselves in the future of healthcare. As consumer behavior continues to change as a result of COVID-19, health insurers will have to be responsive to the way their members are getting care and interacting with the healthcare system.
  • Health insurers are uniquely situated to leverage digital health technologies. Data-driven technology is only as good as the data behind it. Due to the critical role health insurers play in paying for healthcare services, they have insight into member patterns of care and utilization that can be used to target interventions, influence member decision-making and improve health. Investments in digital tools and analytics, as well as strategic partnerships with technology companies, will allow for increased leverage of this valuable data, improved integration of member health information and enhanced member engagement.
  • Interoperability with existing health IT systems is crucial to break down barriers to digital health implementation. Healthcare has been grappling with data interoperability challenges for decades. To scale and make the information from digital tools actionable as part of a larger care plan, digital health platforms must also be interoperable with existing health IT systems. Interoperability will also allow insurers to gather a more complete picture of a member’s longitudinal health data and enable them to better support member health.
  • Health insurers and their legal teams will need to remain nimble amidst the rapidly changing regulatory environment. Keeping up with changing regulations during the COVID-19 public health emergency while planning to scale up in terms of technology implementations is a delicate balance. Though federal, state and local agencies appreciate that digital health tools and telemedicine have much potential in terms of patient care, health insurance companies remain vigilant of privacy and security risks and continue to be constrained in their [...]

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Remote Care Providers Await Final New Jersey Registration and Reporting Regulations

In 2017, the New Jersey legislature passed the New Jersey Telehealth and Telemedicine Act (codified at N.J.S.A. 45:1-61 et seq.), which established registration and reporting requirements for “telemedicine and telehealth organizations.” After a multi-year wait for details regarding the registration process, the New Jersey Department of Health (NJ DOH) published a proposed rule in April 2020 that brought providers of telehealth services in New Jersey one step closer to the implementation and enforcement of the registration requirements. A final rule is expected by April 2021.

New Jersey providers are also expecting the publication of a proposed rule detailing the reporting requirements for registered organizations. While the coronavirus (COVID-19) public health emergency has led many states to implement waivers and other measures to allow for the expansion of remote healthcare services within their states, telehealth and telemedicine organizations operating in New Jersey should prepare to comply with additional requirements and the outlay of annual registration fees if the state finalizes the registration requirements as proposed.

Background: The 2017 Telemedicine and Telehealth Act

For purposes of the Act, a “telemedicine or telehealth organization” is defined as a corporate entity “that is organized for the primary purpose of administering services in furtherance of telemedicine or telehealth.” The Act differentiates telemedicine from telehealth: “telehealth” is the use of information and communications technologies (including telephones, remote patient monitoring devices or other electronic means) to support clinical healthcare, provider consultation, patient and professional health-related education, public health, health administration and other services, whereas “telemedicine” is the delivery of healthcare services using electronic or technological means (not including the use, in isolation, of audio-only telephone, electronic mail, instant messaging, phone text or facsimile transmission) to “bridge the gap” between a healthcare provider located at a distant site and a patient located at an originating site.

In addition to establishing requirements for providers’ use of telemedicine and telehealth, the Act requires telemedicine or telehealth organizations to register with the NJ DOH annually, and to submit annual reports to the NJ DOH that include data elements established by the NJ DOH commissioner and, at a minimum, the following de-identified encounter data:

  • The total number of telemedicine and telehealth encounters conducted
  • The type of technology utilized to provide services using telemedicine or telehealth
  • The category of medical condition for which services were sought
  • The geographic region of the patient and the provider
  • The patient’s age and sex
  • Any prescriptions issued.

The Act did not establish any enforcement mechanism for the registration and reporting requirements, and because the NJ DOH has not yet implemented criteria for registering or reporting, New Jersey providers of remote health services have generally operated without regard to these statutory requirements.

Implementation of the Registration Requirement

The April 2020 proposed rule would implement the registration requirement for telemedicine or telehealth organizations and establish enforcement mechanisms available to the NJ DOH against any telemedicine or telehealth organization that fails to comply.

The proposed rule would require telemedicine and telehealth organizations to register with the NJ DOH [...]

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CMS Takes a Preliminary Step to Make Certain COVID-19 Waivers Permanent

On August 4, 2020, the Centers for Medicare and Medicaid Services (CMS) released a proposed rule to update its payment policies under the Medicare Physician Fee Schedule (PFS) for calendar year 2021. The proposed rule was issued in tandem with a presidential executive order, which directed the Secretary of the US Department of Health and Human Services (HHS) to propose regulations expanding telehealth services covered by Medicare. CMS stated that the proposed rule “is one of several proposed rules that reflect a broader Administration-wide strategy to create a health care system that results in better accessibility, quality, affordability, empowerment, and innovation.”

In response to the coronavirus (COVID-19) public health emergency (PHE), CMS has issued several temporary waivers and flexibilities that expand telehealth reimbursement under Medicare, Medicaid and the Children’s Health Insurance Program for the duration of the COVID-19 PHE. CMS issued these waivers under authorities granted pursuant to HHS’s public health declaration, as well as legislation passed in response to the pandemic. Many of these waivers have substantially altered the Medicare telehealth reimbursement landscape and, as we detailed in our prior On the Subject, many can be made permanent via regulatory action. The proposed rule represents the first official word that CMS will take such action to make certain of its waivers permanent. These policy changes have the potential to greatly increase the availability of telehealth to Medicare beneficiaries around the country.

CMS will accept comments, either electronically or by mail, on the proposed rule until 5 pm EDT on October 5, 2020.

Changes to Medicare Telehealth Services

CMS proposed to add several services, listed below, to its list of services that may be delivered via telehealth. Many of these were previously added on an interim final rule basis for the duration of the PHE. The proposed rule would keep them on the Medicare telehealth services list even after the PHE ends.

CMS also proposed a new method for adding or deleting services from the Medicare telehealth services list. Currently, CMS evaluates new services for inclusion based on two categories: Category 1 is for services that are similar to professional consultations, office visits and office psychiatry visits that are already on the Medicare telehealth services list, while Category 2 is for services that are not similar to those already on the list, but that would still be appropriate to include because the service is accurately described by the corresponding code when delivered via telehealth and providing the service via a telecommunications system results in clinical benefit for the patient. Because of the COVID-19 PHE, CMS has proposed to add a Category 3, which would include services that would be temporarily on the Medicare telehealth services list. CMS proposed this third category because, while CMS currently has the authority to waive or modify Medicare telehealth payment requirements during the PHE, that authority will expire once the PHE [...]

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TREATS Act Aims to Expand Use of Telehealth to Treat Substance Use Disorder

A bipartisan pair of US senators have proposed legislation that would allow certain controlled substances to be prescribed via an initial telehealth encounter and—under certain conditions—expand Medicare reimbursement of audio-only substance use disorder treatment services. The proposed TREATS Act has been referred to the Senate Committee on Health, Education, Labor, and Pensions, and could significantly reduce the regulatory burdens associated with the remote prescribing of controlled substances.

For more than a decade, healthcare providers in the United States have been largely prohibited from prescribing controlled substances via telehealth without having previously performed an in-person medical evaluation of the patient. Although Congress created the framework for a “special registration” pathway that has the potential to more broadly permit the practice, the Drug Enforcement Administration (DEA) has not issued regulations to implement it. This has been a significant roadblock for the treatment of substance use disorder, which is often treated with controlled substances. Recently, Senators Rob Portman (R-OH) and Sheldon Whitehouse (D-RI) proposed the Telehealth Response for E-prescribing Addiction Therapy Services Act (the TREATS Act), which would allow certain controlled substances to be prescribed via telehealth. The TREATS Act also proposes to expand Medicare reimbursement of audio-only substance use disorder treatment services, if certain conditions are met. The TREATS Act was introduced on June 30, 2020, and has been referred to the Committee on Health, Education, Labor, and Pensions.

Remote Prescribing of Schedules III and IV Controlled Substances

The remote prescribing of controlled substances has been stymied by the Ryan Haight Online Pharmacy Consumer Protection Act of 2008 (the Ryan Haight Act), which typically requires providers to perform an in-person medical evaluation of the patient prior to prescribing controlled substances. The Ryan Haight Act does incorporate seven pathways by which practitioners can prescribe controlled substances via telemedicine without a prior in-person examination, but these exceptions are extremely narrow and it is difficult for most providers to meet their requirements. One of the pathways, however, called for a “special registration process” that had the potential to more broadly permit providers to prescribe controlled substances via telemedicine. Congress left the implementation of the special registration process up to the DEA—and the DEA never issued regulations to implement it. After ten years of silence, Congress again pushed the DEA to act, imposing a second deadline for the DEA to implement regulations regarding the special registration process by October 24, 2019, under the SUPPORT for Patients and Communities Act. While there were rumblings that the DEA was prepared to act in late 2019, it is still yet to issue a proposed rule regarding the special registration process.

As we explained in a prior On the Subject, the COVID-19 public health emergency ushered in a significant, albeit temporary, change to the Ryan Haight Act, permitting providers to prescribe controlled substances via telehealth without a prior in-person medical evaluation during the pendency of the public health emergency declared [...]

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Preparing Your Data for a Post-COVID-19 World

The US healthcare system’s data infrastructure needs an overhaul to prepare for future health crises, streamline patient care, improve data sharing and accessibility among patients, providers and government entities, and move toward the delivery of coordinated care. With insights from leaders from Arcadia, Validic and McDermott, we recently discussed key analyses and updates on the interoperability and application programming interfaces (API) criteria from the 21st Century Cures Act, stakeholder benefits of healthcare data exchange and data submission facilitation for public health purposes. Click here to listen to the webinar recording, and read on for highlights from the program.

To learn more about the “Around the Corner” webinar series and attend an upcoming program, click here.

PROGRAM INSIGHTS

  • COVID-19 is reshaping healthcare through technology. Hospitals, clinicians and payors need to use digital health tools to address the challenges of the coronavirus (COVID-19) public health pandemic. How COVID-19 data and health information are captured, and then move through electronic systems, will form the foundation by which digital health tools can become effective in identifying cases, treating them and ensuring favorable outcomes.
  • API certification requirements under the 21st Century Cures Act are designed to enhance the accessibility of electronic health information. The 21st Century Cures Act’s purpose is to advance interoperability, address information blocking, support seamless exchange of electronic health information and promote patient access. Putting data from electronic health records (EHRs) into patients’ hands through consumer-facing apps will empower them to understand and take control of their health.
  • EHR vendors will be required to offer APIs that comply with the Fast Healthcare Interoperability Resource (FHIR) standard by May 1, 2022. The 21st Century Cures Act Final Rule will require EHR vendors to offer FHIR based APIs that make electronic health information more readily available to third-party applications (apps) of patients’ and providers’ choosing. API standardization will make it easier for third-party developers to build these apps, and for patients and providers wishing to use third-party apps to leverage their electronic health information for various purposes, including health information exchange and population health management.

 

  • Interoperability refers to the standards that make it possible for different EHR systems to exchange patient medical records and information between providers. Increased interoperability between EHR systems using harmonized standards allows for a more seamless transfer of patient data between providers. The interoperability requirements in the 21st Century Cures Act have the potential to advance patient access to their data and the use of information among physicians.
  • Both providers and patients can drive data exchange. One challenge impacting data exchange between patients and providers is that providers cannot always access or integrate data that patients have created with third-party tools (e.g., fitness trackers). However, there is emerging technology designed to aggregate and standardize consumer-generated health information, enabling the [...]

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