Dana Kessler, M.B.A.
Duke University Fuqua School of Business

Haider Warraich, M.D.
Fellow, Advanced Heart Failure and Transplantation, Duke University Medical Center, Durham, North Carolina

Introduction

The digital revolution is fundamentally altering everyday life and has transformed various industries including banking, entertainment, utilities and travel. Although health care has to date lagged in integrating digital technological advances, the landscape is quickly changing and is largely being driven by consumer demand: 87% of consumers have at least one digital health tool, up from 80% in 2015,1 and the use of wearables since 2014 has increased from 9% to 33%.2 This demand is leading to considerable investment: Since 2010, more than half of digital health investments have occurred in companies whose technology is consumer-facing.3

Consumer-facing health apps generally fall into two categories: (1) apps that track, collect, analyze and share health data to improve insight into chronic disease management (CDM) in health conditions such as diabetes, Parkinson’s disease and asthma, and (2) apps that provide access to health information and resources to navigate the health care experience such as evaluating patients, managing prescriptions and understanding medical bills. Cardiovascular disease has seen some of the greatest growth and innovative products, such as wearable heart monitors developed by AliveCor (Mountain View, California) and Apple (Cupertino, California). By blurring the lines between traditional medical devices and consumer technology, these products are disrupting the traditional health care ecosystem. They also provide a useful case study to assess how such technology alters the interface between patients, providers and payers, as well as the regulatory framework that guides their appraisal.

Barriers to Digital Health Innovation

The attention to preventive care and improved outcomes has initiated a gradual shift among providers from practicing episodic care to continuous treatment that extends beyond the hospital or clinic. Digital health apps can aid this shift. Novel remote monitoring technology can use either existing abilities available in consumer tech, such as accelerometers, or can add on additional tools, such as heart sensors, to generate real-time patient data. This generation of real-time patient-generated health data can disrupt traditional health management by providing a scalable approach to improve the cost and quality of health care. Furthermore, such technology has the potential to activate patients in their own health care. This is a particularly important development at a time when the calls for patients to have free access to their data are becoming louder. The demand for innovation from consumers, at times, has not been followed by similar enthusiasm from clinicians and health systems. Whereas a recent survey revealed that 86% of physicians believed digital tools offer an advantage and 45% were interested in remote patient monitoring devices, only 26% of clinicians recommended patient- engagement technologies and only 13% used remote patient-monitoring technologies, citing concerns about malpractice liability, privacy, security, application selection, financial incentives and workflow integration as impediments to adoption.4 Approval of digital health apps, devices and wearables from regulatory bodies such as the Food and Drug Administration could likely remove significant physician-related barriers in the adoption of these technologies.

CDM apps are also an innovative category that could help patients take better care of their chronic conditions as well as help providers and health systems manage their populations with high-cost, high-need conditions. An example of such an app is Twine Health, a cloud-based HIPAA-compliant platform that provides scalable coaching to patients largely with cardiovascular conditions such as diabetes and hypertension. Twine Health has recently been acquired by Fitbit (San Francisco, California), showing the growing interest in CDM apps. In one instance, the Twine Health app was used by Newton-Wellesley Hospital in Massachusetts to connect its patients to coaches who then helped them meet their lifestyle goals in an effort to reduce readmissions. However, CDM apps also face several barriers to uptake. Many patients are wary of spending money on apps focused on health, especially when they might be already significantly burdened by conventional health care costs. On the other hand, in cases where health systems acquire these apps, they have difficulty getting uniform uptake from providers.

A major reason that the tech sector has traditionally been reluctant to make substantial investments in health care is the stringent regulatory ecosystem instituted by the FDA that guides the development, validation and use of medical technologies. Such a regulatory framework is necessary to protect patients from direct harm as well as unintended consequences of technical advancement. To undergo traditional FDA approval, a product is classified based on its intended use, indications for use and the potential risk to the patient. Without FDA approval, a medical device cannot be marketed in the United States. But perhaps more importantly, without FDA approval, a medical device is unlikely to be covered by traditional health plans and medical malpractice coverage, two components that providers cited as key considerations in their adoption of digital health tools.5 However, recent years have seen recognition of the constraints traditional regulations have placed on innovative digital health initiatives.

Lastly, a major barrier to innovation in digital health has been the lack of a framework for reimbursement of digital health tools. Although Medicare has recently expanded reimbursement options for traditional telemedical services, these codes don’t include coverage for consumer-facing apps.6 However, as medical payments move away from a fee-for-service model to a population-health and outcomes-based model of payment, health systems and accountable care organizations might be incentivized to invest in these technologies. Furthermore, a newer series of reimbursement codes is being rolled out that would cover more remote monitoring services.

In the cardiovascular space, AliveCor, a provider of a mobile heart-monitoring system, offers strong evidence that consumer-facing tools can engage patients and physicians to achieve better outcomes. The promise of this technology was demonstrated by the interest of companies such as Apple in incorporating heart-monitoring capability in the Apple Watch 4.

AliveCor

Electrocardiography (EKG) is essential in the evaluation of patients presenting with cardiac ailments. Although the U.S. Preventive Services Task Force does not recommend routine performance of EKGs in healthy adults, it remains an essential method for detecting many cardiac abnormalities such as atrial fibrillation, a condition affecting up to 6 million Americans. Although heart-rate detection using wearables developed by companies such as Fitbit and Apple have been available, these wearables did not provide any information beyond the simple detection of how many times the heart beat in a minute.

In medical practice, continuous EKG monitoring is performed in patients suspected of abnormal heart rhythms. Traditional medical devices to monitor the EKG, such as the Holter monitor, are cumbersome, restrictive and can be used only for a limited time, whereas longer-lasting monitors such as implantable loop recorders require surgical implantation.

AliveCor, #20 on Fast Company’s list of the 50 most innovative companies in 2018, has developed continuous EKG monitoring products that use artificial intelligence and machine-learning algorithms with sensors on the Apple Watch or Apple iPhone to discern cardiac abnormalities. Because the Apple Watch is worn by patients throughout the day, AliveCor captures patterns of cardiac rhythms to create a customized view of a patient’s heart rate. If abnormalities are detected, users are notified to take an EKG using the KardiaMobile or KardiaBand, which, in conjunction with the mobile application, analyzes the recorded EKG for the occurrence of atrial fibrillation.7 The analysis can then be shared with a physician, who, using AliveCor’s Kardia Pro services, can seek reimbursement under CPT code 99091. An additional series of 994 codes are also set to be released that would further expand the remote monitoring applications that could be included and the staff that could bill for such services.

AliveCor’s products range from $15 to $199, with the KardiaBand for Apple Watch garnering the highest price tag. In addition to sales of physical products to consumers, AliveCor is positioned to capture revenue from providers through its physician analysis capabilities. Health care systems can pay a fee to join the AliveCor platform, allowing providers to connect to their patients’ EKGs. Providers receive patient care plans that allow them to manage their patients with atrial fibrillation, diagnose high-risk patients and monitor post-surgical patients. Although the fee schedule for this service is undisclosed, the inclusion of provider-facing software is positioned to drive additional revenue through software service fees and by encouraging providers to refer their own patients who would benefit from continuous cardiac monitoring to utilize AliveCor monitoring. Additionally, AliveCor offers a premium membership that provides users unlimited history and storage of EKG recordings, customized reports and the ability to share results with the patient’s doctor.

In November 2017, AliveCor’s KardiaBand became the first FDA-approved medical device accessory for Apple Watch.8 The FDA categorizes devices from Class I to III, based on their risks. A tongue depressor could be considered a Class I device, whereas something like an artificial heart valve or pacemaker could be considered Class III. AliveCor’s Kardia monitoring products are all FDA-approved as Class III medical devices, based on the level of safety and efficacy data produced by the company and independent evaluations.9,10

AliveCor sought FDA approval, which can be risky and resource consumptive. However, the approval of their products promises to reshape the ecosystem of health care innovation in the future. Although seeking FDA approval can be challenging, the rewards for success are numerous. FDA approval can help provide the product a very high level of legitimacy in the eyes of patients and providers and can also help facilitate the development of reimbursement models from payers.

AliveCor has continued to innovate and expand its functionality through additional machine- learning algorithms. Through a partnership with the Mayo Clinic, AliveCor has incorporated the ability for its device to detect long QT syndrome, a genetic disorder passed down in families, which can be life-threatening and for which the EKG is essential for diagnosis. Furthermore, the device can also now detect abnormally high levels of potassium in the body through the effects those levels have on the EKG, another impressive feat. For this technology, the FDA granted AliveCor “breakthrough device“ designation to expedite evaluation and possible approval.

Apple Watch 4

Apple, one of the largest companies in the history of the world, has also recognized the importance of digital health and continuous remote monitoring, and in the latest iteration of its Apple Watch, has added continuous EKG monitoring. The introduction of this feature on the Apple Watch threatens to make the AliveCor products redundant; however, some differences exist in how Apple’s device was regulated. The Apple Watch gained clearance, as opposed to approval, as a Class II device, similar to, say, a motorized wheelchair, using data from only a few hundred users. This designation allows the device to reach consumers without the same level of evidence required for a Class III product, such as AliveCor’s. FDA clearance, though, was a critical part of Apple’s marketing for its product. The company received clearance only a day before CEO Tim Cook announced the launch of the Apple Watch 4, and the clearance from the FDA was a major point of emphasis at the launch. Apple is now undertaking a study of almost 400,000 patients in partnership with Stanford University, to gain better data about their product. However, a key difference from AliveCor products is that the Apple Watch EKG monitoring function is part of every device purchased by consumers, and therefore would expose countless individuals to monitoring who may have no need or desire for this functionality, as opposed to AliveCor, whose products will be specifically purchased by individuals interested in that function. These considerations are particularly important given the large reach of these devices: Apple was expected to sell almost 20 million watches in 2018 alone.

AliveCor and Apple demonstrate two separate strategies to advance digital health. AliveCor appears to be taking a much more rigorous approach, targeted more toward patients and physicians, and therefore has successfully achieved Class III FDA approval for its device. To expand its market share, the company is specifically hoping to have its technology and services reimbursable through patients’ insurance or health-system investments. This reimbursement can only occur if the company can demonstrate value, specifically to these two entities. Apple Watch, though it might change in the future, so far only has Class II clearance, and it might not want to overemphasize the remote monitoring aspects of its products, given that it markets primarily to healthy individuals. This scenario is possible because whereas an Apple Watch can provide varied functions to consumers, AliveCor’s products are much more specialized.

FDA Regulations in a Changing Health Care Ecosystem

The success of EKG monitoring is only the tip of the consumer-facing digital health iceberg: Innovative startups are opening across the United States and around the world, hoping to transform health care access and delivery.

Regulatory bodies such as the FDA, however, are evolving to keep pace. In recognition of the potential of digital health care to improve and lessen health care costs, and in response to the increasing number of available technologies, the FDA’s Center for Devices and Radiological Health published a Digital Health Innovation Action Plan, designed to accommodate the increasing number of new technologies and facilitate health care innovation. The plan initiatives specifically aim to (1) redefine the criteria for products that require FDA approval and (2) mitigate the FDA approval process for manufacturers.

The proliferation of health care technology, mobile devices and wearables created the need for updated criteria for products that are subject to FDA oversight. Historically, the FDA has required any item listed in the National Formulary or United States Pharmacopoeia that is intended for use in the diagnosis, prevention, cure or mitigation of disease to obtain FDA approval. With the recent advances in technology, the FDA acknowledged that “our traditional approach to overseeing certain health care products does not easily fit the types of innovations that are being developed.“11 On December 7, 2017, the FDA released draft guidelines that redefined what products are considered medical devices and therefore subject to FDA regulation.

First, the guidelines propose changes to the types of software that are considered medical devices. The new guidelines exclude general wellness products and mobile medical applications that are not related to the “diagnosis, treatment, prevention, cure or mitigating of diseases or other conditions,12 from classification as medical devices that are subject to FDA approval, specifically noting that applications that are intended only for maintaining or encouraging a healthy lifestyle pose a low risk to patients, but can significantly benefit consumers and the health care system.

Additionally, the guidelines give specific consideration to Decision Support Software. Although the drafts delineate between Clinical Decision Support Software, intended for health care providers, and Patient Decision Support Software, intended for patients, both guidelines identify user involvement in the software recommendations as key criteria for requiring FDA oversight. Patient and Clinical Decision Support Software that allow for independent patient, caretaker or provider review of the basis for the devices’ recommendations are not subject to FDA approval, whereas products that contain analytical functionality to make recommendations are considered medical devices and thus subject to FDA oversight. For example, a warfarin monitoring device that makes dosing recommendations based on the results of a home blood test is considered a medical device and would be subject to FDA oversight, whereas a “software that reminds a patient to take a prescribed drug, consistent with a drug’s labeling,“ allows for independent review of the recommendation and thus would not be subject to FDA oversight. Because inaccuracies in products that do not allow review of the recommendation by a patient or medical professional can cause significant patient harm, the FDA retains oversight of their quality to ensure patient safety.

Finally, The Digital Health Innovation Action Plan introduced a new pre-certification program that evaluates companies, rather than specific products, in their ability to deliver safe and effective medical devices.13 Companies that are approved through the program would be subject to less stringent regulation of new devices and able to build products without each new device undergoing the FDA clearance or approval process. Nine companies, including Apple and Verily, are currently under evaluation.14 The key features of reforms underway at the FDA to facilitate innovation in digital health were recently summarized in an article authored by FDA leadership that was published in the Journal of the American Medical Association.

As the U.S. health care system continues its shift toward value-based care, digital health apps and patient-monitoring tools that encourage patient engagement can facilitate management of long-term care. This feature of digital health technology has been perhaps most enthusiastically noted by the FDA, which has instituted major reforms that unburden most digital health products from strict regulations that have been applied to traditional medical devices, and has streamlined the process for Class II and III devices such as the Apple Watch 4 and products from AliveCor. Consumers, too, have eagerly driven the demand for these devices and apps. Physicians, health systems and insurers, though, have been less aggressive about incorporating these advances. However, as more devices, apps and wearables gain FDA approval, enthusiasm is likely to grow and avenues for reimbursement are likely to expand. Furthermore, because patient-facing applications are most successful when directed by physicians, new entrants must address provider concerns about malpractice liability, privacy and security, interoperability and monetization.

Regulators, specifically the FDA, must also balance the need to streamline the device and app approval process to facilitate innovation with their fiduciary responsibility to protect health care consumers. The digital health revolution is likely to have many unintended consequences by exposing millions of otherwise healthy individuals to medical-grade monitoring. This exposure could lead to an epidemic of false positive tests and incidental findings, the consequences of which have not yet been vigorously investigated.

Additionally, with the development of various health care technologies comes the difficulty of integrating several platforms that individually manage segmented components of the patient’s health care journey. Therefore, digital platforms that aim to connect patient data with providers must have sufficient computing and analytics, data management and assessment, and information processing of health care data. To achieve the coordination-of-care objective of the Affordable Care Act, interoperability standards must be addressed to allow the sharing of patient data across a patient’s team of health care professionals.

Finally, public and private payers must adapt to embrace digital health tools. For patients, who are more price-sensitive than ever, the device must demonstrate substantial benefits in the management of chronic disease. Providers and institutions must be able to achieve financial benefits from engaging in digital-care delivery. If achieved, patients, providers and payers could gain a comprehensive narrative of patients’ health, which could permanently alter the current interface between patients and medicine.

Exhibit 1