The telehealth industry has long been poised for explosive growth and some experts think 2014 is the year it begins, including Roeen Roashan, an analyst at market research firm IHS, predicting last December that the U.S. telehealth market will swell a stunning 56% annually from $240 million in 2013 to $1.9 billion in 2018. Last Friday, the Centers for Medicare and Medicaid Services, or CMS as it’s often called, spurred this growth by adopting a policy change to its Physician Fee Schedule for 2015, breaking historic ground by expanding its coverage to pay for remote chronic care management for the first time in its history.
The proposed change was announced in July and widely received by organizations in the healthcare industry with praises for CMS, including positive comments from the American Medical Association, American Hospital Association, American Telemedicine Association and many more. The adopted rule calls for 20 minutes of "non-face-to-face" chronic care management per patient by a physician, their staff or "affiliated" staff to qualify for reimbursement of $42.60 per patient each month, starting January 1, 2015.
The move to reimburse for remote chronic care is about improving quality of care and reducing long-term costs by taking a more proactive approach to intervention. Take for example diabetes, the most costly chronic disease in the country (an estimated $245 billion annually), where a phone call or message from a care team monitoring data of the diabetes patient could lead to a change in the care plan and avoid hospitalization. Consistent with that concept, more efficient care at earlier stages can help abate any number of serious (and costly) complications of diabetes, such as kidney disease or amputations, in the future. In short, it’s the idea of employing best practices to try and prevent early-stage diabetics from progressing to advanced stages and later-stage diabetics from becoming a total train wreck. Research shows that much of this can be accomplished through remote care technologies.
There’s plenty of clinical data to support the efficacy of remote monitoring, including that of ALR Technologies (OTCQB:ALRT), the developer and marketer of the FDA-cleared and HIPAA compliant Health-e-Connect System. Clinical studies showed a significant reduction of more than a 1% reduction in A1c, the gold standard in assessing diabetes control, in just six months for patients being monitored under the Health-e-Connect System. In the system, a patient regularly uploads the data from their blood glucose meter to a secure website where trained Diabetes Care Facilitators (DCF) routinely monitor the data looking for trends that deviate outside specific parameters, while also watching to ensure that the patient is following the prescribed protocol for their diabetes management.
When outliers are identified, the DCF contacts the appropriate parties, such as the patient, clinician and other responsible caregivers, so appropriate action may be taken. Additionally, ALRT handles the requisite data for any audits to quantify the 20 minutes of necessary remote chronic care for CMS reimbursement.
With the new PFS for 2015 of CMS, ALR Technologies’ services are qualified for reimbursement starting January 1 for Medicare-eligible patients with diabetes, a population that is expected to grow from about 10 million patients currently to 14.6 million by 2034. In simple math, that’s presently a $426-million opportunity per month, or $5.11 billion annually, when considering only the Medicare market. For illustration purposes, capturing only a small percentage (1% = $51.1 million annually, 10% = $511.0 million annually) equates to substantial revenue for a company like ALRT with only a $7-million market capitalization.
On a broader scale, there are an estimated 29.1 million Americans with diabetes (21.0 million diagnosed, 8.1 million undiagnosed), according to the National Diabetes Statistics Report 2014.
Worldwide, the International Diabetes Federation estimated that there were 366 million diabetics in 2011, with that number expected to rise to 552 million by 2030 at the current trend.
ALRT is now on the road to revenue with the New Year because of an agreement with the Kansas City Metropolitan Physicians Association (KCMPA), one of the nation’s premier Accountable Care Organizations (ACO). The two companies have partnered in the first large-scale rollout of Health-e-Connect in the U.S., with an agreement in place that if the PFS rule was adopted, KCMPA will start paying ALRT for services as soon as they can bill CMS.
"We intend to bring our diabetes management program to additional physician groups across the country who can access this new reimbursement and then more closely monitor the health of their diabetes patients,” said Bill Smith, President of ALR Technologies, in a statement today.
ALRT CEO and founder Sidney Chan noted that CMS tends to set precedent for what insurers will cover. “[If] history is any guide, private sector plans may follow as Medicare is often a trendsetter in reimbursement policies," he added in the Tuesday announcement.
ALRT finds itself in an enviable position going forward due to its relationship with KCMPA, as ACOs, in Medicare and among the privately insured, are expected to be a leading driver in telehealth. This is because physicians in an ACO are often financially incentivized to hit certain quality indicators that reduce the risk of a patient being hospitalized. The Health-e-Connect System not only can help the physician meet these quality indicators, but now the physician can be reimbursed for remote care through an affiliate (ALRT), making it twice as attractive to the clinician and a win for everyone involved.
