AI Health Law & Policy: Health Tech Investment Act would create AI-enabled device Medicare payment pathway

The role of AI in medical fields like radiology is rapidly expanding, as emerging technology can assist health care professionals in image analysis, aiding detection of abnormalities and speeding diagnostic results. Yet, a predictable reimbursement pathway for AI-enabled medical devices remains a challenge for developers of innovative health technology, who need to identify an appropriate code to utilize as a path to Medicare reimbursement and payment. FDA has authorized more than 600 AI-enabled medical devices. While some of these codes do qualify for Medicare reimbursement, the Center for Medicare & Medicaid Services (CMS) lacks standard or consistent methods for reimbursing and paying for these medical products.

Aiming to remedy this concern for sponsors of AI-enabled devices, the Health Tech Investment Act would provide certainty and a 5-year runaway for new technology ambulatory payment classifications (APCs) for FDA-authorized medical devices that rely on AI and machine learning (ML), which are called “Algorithm-Based Healthcare Services (ABHS).” Announcing the legislative proposal, Sen. Rounds said: “Medicare patients deserve access to the life-changing care that artificial intelligence-enabled devices can offer. There is currently no clear Medicare payment system for these devices, meaning that it can take years to be approved and paid out by Medicare accurately. This legislation would create that system, improving diagnoses and encouraging the adoption of AI devices in clinical settings.”

The Act would define an ABHS as follows:

“a service delivered through a device cleared or approved by the Food and Drug Administration that uses artificial intelligence, machine learning, or other similarly designed software to yield clinical outputs or generate clinical conclusions for use by a physician or practitioner in the screening, detection, diagnosis, or treatment of an individual’s condition or disease, or any such other similar service as the Secretary determines appropriate in consultation with appropriate organizations.”

The legislative proposal would also codify the hospital outpatient prospective payment system (OPPS) payment for software as a service policy.

This legislative proposal follows other efforts to establish automatic payment for new medical devices. In the previous Congress, the Senate and House Appropriations Committee and bipartisan Senate and House AI Task Forces each addressed the importance of establishing a payment pathway for AI-enabled medical devices in policy reports and roadmaps. Yet, until legislative changes are made to the Medicare statute to provide a new benefit category for digital therapeutics, medical device sponsors must think carefully about how they can fit within the currently statutorily-defined benefit categories.

On April 29-30, Hogan Lovells and the AI Health care Coalition are hosting our fourth annual AI Health Law & Policy Summit, which will review, among other topics, AI legislative policy proposals, and Medicare reimbursement for AI-enabled technology. In this interactive program, thought leaders and policymakers will address a variety of topics including FDA regulations, emerging health care AI legislation and policy considerations, AI ethics and consumer safety, global regulatory developments, and more. The article above is part of our thought leadership series designed to set the stage for the Summit and equip you with essential background information on this rapidly evolving landscape. Feel free to reach out to the author of this alert or the Hogan Lovells attorney with whom you regularly work with any questions.

Authored by Cybil Roehrenbeck.