Healthcare Huddle Co-Founder Jared Dashevsky

Artificial Intelligence

Scaling Adoption of Medical AI

Medical AI is on the brink of improving outcomes for countless patients, prompting a trio of all-star researchers to pen an NEJM AI article tackling what might be its biggest obstacle: real-world adoption.

What drives real-world adoption? Those who have been around the block as many times as Dr. Michael Abramoff, Dr. Tinglong Dai, and Dr. James Zou are all-too familiar with the answer… Reimbursement makes the world go ‘round.

To help medical AI developers get their tools in front of the patients who need them, the authors explore the pros and cons of current paths to reimbursement, while offering novel frameworks that could lead to better financial sustainability.

Traditional Fee-for-Service treats medical AI similarly to how new drugs or medical devices are reimbursed, and is a viable path for AI that can clear the hurdle of demonstrating improvements to clinical outcomes, health equity, clinician productivity, and cost-effectiveness (e.g. AI for diabetic eye exams).

• Meeting these criteria is a prerequisite for adopting AI in healthcare, yet even among the 692 FDA-authorized AI systems, few have been able to pass the test. The approach carries substantial risk in terms of time and resources for AI developers.

• Despite those limitations, FFS might be appropriate for AI because health systems are adept at assessing the financial impact of new technologies under it, and reimbursement through a CPT code provides hard-to-match financial sustainability.

Value-based care frameworks provide reimbursement on the basis of patient- or population-related metrics (MIPS, HEDIS, full capitation), and obtaining authorization for medical AI to “count” toward closing care gaps for MIPS and HEDIS has been shown to be considerably more straightforward than attaining a CPT code.

• That said, if a given measure is not met (e.g. 80% of the population must receive an annual diabetic eye examination), the financial benefit of closing even three quarters of that care gap is typically zero, potentially disincentivizing AI adoption.

Given the limitations of existing pathways, the authors offer a potential new approach that’s derived from the Medicare Part B model, which reimburses drugs administered in an outpatient setting based on a “cost plus” markup.

• Here, providers could acquire the rights to use AI, then get reimbursed based on the average cost of the service plus a specified margin, contingent upon CMS coverage of a particular CPT code.
• This model essentially splits revenue between AI creators and users, and would alleviate some of the tensions of both FFS and VBC models.

The Takeaway

Without sustainable reimbursement, widespread medical AI adoption won’t be possible. Although the quest continues for a silver bullet (even the authors’ revenue-sharing model still carries the risk of overutilization and requires the creation of new CPT codes), exploring novel approaches is essential given the challenges of achieving reimbursement through existing FFS and VBC pathways.

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The Wire

• UnitedHealth’s First Report Since Outage: It’ll take more than one of the worst cyberattacks of all time to break UnitedHealth Group’s momentum, with shares in the company popping over 5% after reporting $99.8B in revenue for the first quarter since the hack. UHG told investors that it expects the final tab for the cyberattack to total about $1.6B when all is said and done, basically a rounding error on its $400B of expected 2024 revenue. The conglomerate is still working to restore functionality to many of its applications, and has a fun antitrust probe waiting for it once that’s taken care of.

• Bad News for Debt Relief: A shocking study from the National Bureau of Economic Research looked into the downstream effects (or lack thereof) of RIP Medical Debt wiping out $169M of medical debt for 83,401 people between 2018 and 2020. Researchers were surprised to find that relieving people’s medical debt didn’t improve their level of financial distress, made them less likely to address future medical bills, and had no impact on improving their mental wellbeing. Yikes.

• Elevance Forms New JV: Elevance is taking steps to build its Carelon services arm into an Optum-like care delivery vehicle, forming a joint venture with PE firm Clayton, Dubilier, & Rice to deliver advanced primary care to over a million individuals. CD&R portfolio companies apree health (digital navigation and clinical advocacy) and Millennium Physician Group (900+ physician primary care group) will join with Carelon’s 30 clinics to provide healthcare to high-risk members, such as those with multiple chronic conditions. Still a long way to go to reach Optum, but every vertically integrated juggernaut has to start somewhere.

• Equip Closes $35M: Hawk-eyed reporters over at Endpoints News noticed a securities filing showing that eating disorder telehealth startup Equip closed $35M in yet-to-be-announced funding. Equip declined to give comment on the story, but has now raised a total $95M to treat eating disorders at home by providing virtual appointments with a five-person team of a therapist, a doctor, a dietitian, a family mentor, and a peer mentor.

• Hospital M&A Spikes in Q1: The number of hospital mergers and acquisitions jumped in the first quarter of 2024, with 18 transactions and over $10B in total revenue for the targets. Those figures easily eclipse the 12 transactions and $3.4B of target revenue seen in the first quarter of last year, reflecting a general rough operating environment and increasingly ambitious consolidation. The largest three M&A moves from Q1 were General Catalyst’s acquisition of Summa Health, Northwell’s acquisition of Nuvance, and University of Minnesota’s acquisition of Fairview.

• Clarify Adds Transparency Features: Clarify Health is rounding out its price transparency offerings with a pair of new capabilities for its no-code query engine: a Negotiation tool and Coverage Scores. The Negotiation tool helps healthcare orgs quickly understand their overall pricing position relative to the market and pinpoints areas where they may be diverging from their competition. The Coverage Scores help users navigate the often incomplete or irregular data available to measure the completeness and quality of available cost transparency data files.

• Cerebral Gets Hit by FTC: Telehealth startup Cerebral is forking over $7M to settle federal allegations that it shared customer health information with third party advertisers, and failed to honor its promise to provide easy cancellation for its services. In a first-of-its-kind prohibition for engaging in “sloppy practices,” the FTC is also banning Cerebral from using any health information for advertising purposes. The Cerebral news arrives amid a larger crackdown from the FTC, which also just slapped virtual addiction clinic Monument with similar penalties.

• VieCure Adds DrFirst: Cancer care platform VieCure is integrating e-prescribing and medication management solutions from DrFirst into its oncology clinical decision support system. VieCure’s point-of-care support for community oncologists helps generate personalized treatment plans for cancer patients with recommended prescription medications, and adding DrFirst’s Rcopia prescribing platform bolsters its capabilities with a complete medication history data feed, allergy and other clinical alerts, and tools to encourage patient adherence to medication therapies.

• AI For AFib: A Cedars-Sinai-led team developed an echocardiography AI model that accurately detects patients with atrial fibrillation – including asymptomatic patients – potentially revealing a new “opportunistic screening” method to drive earlier AFib detection. Although still in its early stages, the study makes a solid case for how AI could be used to proactively analyze the 7 million echo exams that are performed in the US each year to help identify more undiagnosed AFib patients while their treatment would be most effective. Check out Cardiac Wire’s coverage for all the details.

• Abridge Lands at MemorialCare: Ambient AI startup Abridge continued its push into California by inking a new partnership with MemorialCare. The SoCal-based system has over 225 care locations, and pointed to Abridge’s tuning for over 50 specialties and 14 languages as a way to support its diverse patient population. The news marks Abridge’s third health system in California, following similar moves at both Sutter Health and UC Irvine. 

• New Wave of PE-Fuel Bankruptcies: Over 20% of healthcare bankruptcies in 2023 were private equity-backed organizations, according to a new report from the Private Equity Stakeholder Project. Over 80 healthcare companies filed for bankruptcy last year, and PESP expects to see a similar wave in the coming months due to a rise in distressed companies related to PE-driven consolidation. Apparently “aggressive debt-funded growth strategies” and sustainable care delivery don’t mix.

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