U.S.: Digital Health Companies Struggle to Fit Into Existing Models

Meena Datta, Elizabeth Hardcastle, and Deeona Gaskin explain why digital health technologies continue to face challenges with coding and securing appropriate coverage and reimbursement, despite FDA’s prioritization of digital health guidance, and provide tips for moving forward in the current environment.

Emerging companies and large multinational corporations alike are increasingly focused on strategies for investing in, partnering to create, and developing digital health tools that promise to improve both health outcomes and health equity.

In 2022, in recognition of the importance of digital health technologies, FDA’s CDRH and its Digital Health Center of Excellence prioritized the issuance of several final guidance documents around digital health. These included documents relating to medical device data systems, image storage devices, device software, mobile medical applications, and clinical decision support software.

The field of radiology has been a leader in the adoption of AI and machine learning tools. Increasingly, AI is being developed, cleared or approved, and marketed for additional medical specialties. These include cardiology, pathology, ophthalmology, gastroenterology, and hematology. The potential is clear; there are close to 200 AI and machine learning devices with marketing authorization in the U.S. alone. They have come onto the market through various pathways, including the 510(k) clearance process, a de novo request, or a premarket approval application.

These digital technologies show great promise, but they also raise issues that regulators continue to focus on and that companies should stay aware of and work to address. First and foremost, regulators want any products that fall under the medical device definition to perform as intended and be of high quality. The use of real-world evidence to support marketing authorization continues to be discussed and explored. Bias remains a concern for the development of algorithms that may be trained with data sets that may not include relevantly diverse participants. Additionally, cybersecurity is and will remain a focus among regulators as they look to mitigate risks stemming from unauthorized access and misuse. In 2022, the CDRH published draft guidance on cybersecurity and plans to prioritize the finalization of further cybersecurity guidance in 2023.

Once marketing hurdles are surmounted, on the reimbursement side, many payors, including the federal government, have outdated coverage and reimbursement structures that create roadblocks for digital health companies. In practice, digital health companies are left trying to fit within the existing models and find themselves shoehorning new technologies into pharmacy benefits, device or durable medical equipment categories, or physician services models. Achieving coverage and reimbursement can be a step-by-step process, one that involves securing approvals from individual payors, such as individual state Medicaid agencies or commercial payors.

The past year has seen both opportunities and setbacks in access to digital health technologies. For example, some commercial payors have begun to develop unique formularies or coverage pathways specific to digital health technologies, easing access for patient populations. On the other hand, the coding structure for many digital health technologies continues to lump diverse and distinct products together, making it a challenge to appropriately identify and seek reimbursement for such products.


  • Develop an internal center of excellence to provide a framework for your company’s digital health development efforts.
  • Early in the development of a digital health product, identify an appropriate benefit category and coverage pathway based on product characteristics, FDA approval, clearance, and distribution.
  • Stay up to date on FDA guidance, and consider both regulatory engagement through the Q-submission process and any opportunities to provide comments on draft guidance and to participate in meetings and collaborative communities to help shape FDA’s policy.
  • Consider whether the technology may qualify for breakthrough designation, particularly in light of recent draft guidance from FDA that focused on reducing health disparities.
  • Apply and advocate for appropriate coding that separately identifies technology, if possible.
  • Engage with payors early to seek alignment on the appropriate benefit category and coverage pathway. Determine a strategy for maximizing such engagement based on customer demographics.
  • Consider congressional outreach regarding the need for reforms to improve patient access to digital health technologies.
The views expressed in these articles are exclusively those of the authors and do not necessarily reflect those of Sidley Austin LLP and its partners. This article has been prepared for informational purposes only and does not constitute legal advice. This information is not intended to create, and receipt of it does not constitute, a lawyer-client relationship. Readers should not act upon this without seeking advice from professional advisers.
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