The initial stages of developing a new medical device involves a lot of work around the technical aspects of the device and how it should be designed. Equally important is the question of whether it makes economic sense to pursue the idea. To answer that question, you need to know how public and private insurers will view the device. If your device can fit within an already existing reimbursement code, your economic model will be much more viable than otherwise.
Determining reimbursable status is an investigation that should run in parallel with early design development activities. To get regulatory clearance to market your device, you will need to prove to the FDA that your device is both safe and effective. To be included as a device that insurers will reimburse for, you will need to prove to CMS (Centers for Medicare and Medicaid Services) that your device is both reasonable and necessary.
Unfortunately, the definition of “reasonable and necessary” is not clear-cut. “Necessary” is generally taken to mean medically necessary, based on medical evidence (even that is not a hard-and-fast rule though, as some devices/procedures have been deemed to be reimbursable even though the medical evidence was ambiguous).
Determining reasonableness is even more difficult. It hinges around questions of cost/benefit and risk. It’s important to note that cost-effectiveness is a controversial topic. It can’t be denied that cost is a huge concern throughout the healthcare industry. But industry stakeholders fear that emphasizing cost in reimbursement decisions would lead to denial of needed care. For all practical purposes however, cost/benefit is key in the reimbursement evaluation. In today’s healthcare environment, insurers are looking for lower costs and better outcomes.
For a variety of reasons, it could be difficult to determine at the outset of a project that your new medical device will be reimbursable. And other payment avenues do exist that would support the economic viability of the project. But if you’re able to determine with some confidence that your device will fit within an existing reimbursement code, your business model will be stronger and obtaining investment funding will be much easier.