Why Your Medtech Strategy Should Start with Healthcare Payers: Interview with Health Economist Nic Anderson

Nic Anderson might be the world’s only self-proclaimed “natural-born health economist.” What he means is that he didn’t train for the profession: he questioned his way into it.

While Nic was working on his MA in biomedical imaging at Boston University, he realized his focus was different than his peers’.

“I kept asking, How much does that [procedure] cost?” he says. “I was the only guy that seemed to care about how much all this stuff cost.”

Nic combined his interests in health and economics when he became a payer for Intermountain Healthcare. Since it is an integrated delivery network, the hospitals (or providers) and insurance company (or payer) were on the same campus.

Although Nic was on the insurance side, he also worked with the hospital’s value analysis committee (VAC), presenting research on new procedures and devices he thought would be worth covering.

Nic eventually moved on to other projects, including co-founding a biotech startup. He’s now a consultant, helping medical companies obtain insurance coverage and reimbursement, and works as a health economist for Boston Scientific. By intention, he doesn’t maintain a social media presence, or even a website: He says interested parties can email him.

In this episode of Medsider, Nic explains why medtech companies in particular need to win over insurance payers, how investing early in a health economics and market access (HEMA) team will help you do that, and how to write a dossier a payer won’t want to throw out the window.


Nic Anderson

Healthcare Economist

Health economist Nic Anderson spent seven years at Intermountain Healthcare on the payer side. He learned first-hand what evidence insurers need to convince them to cover a new medical device or healthcare technology.

After co-founding a biotech company, Nic turned his experience as a payer into an in-demand consultancy. He’s also served on payer advisory boards and was an expert in residence at a digital health accelerator in Dubai. He now works as a healthcare economist for Boston Scientific.

Listen to the Interview with Nic Anderson

Key Learnings from Nic Anderson's Experience

  • Medical companies often spend too much time trying to sell physicians on their novel devices or tech, when it’s the payer who decides whether it merits coverage. No coverage means doctors won’t be able to get their hands on it, whether they want to or not.
  • Bringing a specialized health economics and market access (HEMA) sales team onboard from the start will ensure the evidence you gather through clinical trials is tailored to prove your case to payers — saving you time and money in the long term.
  • Acquiring a unique CPT or HCPCS code doesn’t guarantee you coverage, and neither does meeting regulatory requirements. Payers often require more evidence than the AMA, CMS or the FDA, and want proof that specifically focuses on the economic benefits of your medical technology.

Know Who You’re Really Selling to: The Insurance Payer

Physicians may be the ones who will ultimately use your device, but they won’t get their hands on it unless you can convince the insurance payers — your true clients —  to cover it.

Nic says that one of the major mistakes he sees executives at medical device companies make over and over is focusing too much on selling to physicians and hospitals, instead of to the people actually holding the wallet.

Even the makeup of the boards reflects this miscalculation.

“[CEOs] will be like, We have the chief of surgery from this big institution on our board of directors — we're gonna nail it,” Nic says. “And you go, You don't have anybody from Cigna [for example] on your board — you probably should. Those are the guys who write the checks, not the doctors.”

This payer-first approach is different for innovative technology versus commoditized products. Payers don’t need or want to investigate every single new type of gauze that comes out, for example. Doctors and hospitals get to make those decisions.

But when you’re selling something completely novel, the payer absolutely wants to know that it’s cost-effective.

Bring a Health Economist in From the Start

Since you have to sell multiple parties on your product — each with different priorities — it makes sense to have more than one sales team.

Nic recommends having two: Team A communicates with physicians, and Team B — focused on health economics and market access (HEMA) — works with insurance payers.

A common mistake Nic sees medical companies make is trying to bring in HEMA as an afterthought: effectively as a rubber stamp. That approach undervalues the insights HEMA has into what makes your true client — the payer — more likely to sign off on coverage.

Take clinical trials, for example.

You can spend millions of dollars putting together a trial that proves that your product will reduce surgery time from 47 minutes to 23 minutes. That gets a big checkmark from doctors because it means the patient doesn’t have to spend as much time under anesthetic. Also from the hospital’s value analysis committee (VAC), because it means the hospital can fit in more surgeries in one day.

But it won’t move the needle for the payer. And since the payer is the gatekeeper, that means you could end up paying for more trials just to meet their requirements. Specifically, “health economic analyses to show cost-effectiveness, cost minimization, cost-utility, or incremental cost-effectiveness ratios,” Nic says. All things a HEMA team would know to do.

Bottom line: “Stop treating HEMA as the nerds down the hallway that will proofread the stuff that all the adults did earlier. Start bringing them into the discussion earlier, and you will save yourself an astronomical amount of heartache,” Nic says.

How to Write a Dossier that will Ingratiate Yourself with a Payer

The vast majority of the time, a payer’s first encounter with your medical device or health technology company will be through your dossier.

Typically, a credentialed provider — a physician, for example — will call a payer at the hospital’s insurance department, and tell them about this cool new technology or procedure they’ve heard about. (So yes, don’t forget about winning over the providers.)

The payer will then ask for the dossier. In addition to what you provide, they will dig into medical journals to research similar procedures or devices, and compile a health technology assessment (HTA).

Hot tip: If you’re using a very specific term for your device, make it clear. This will make the payer’s life much easier.

The payer presents the HTA to the VAC, which votes based on the assessment and further research specific to the institution, e.g. how many patients were treated for this condition last year?

When it comes to the content of your dossier, choose quality over quantity. Nic says payers are more likely to be convinced by 100 pages of well-conducted, relevant content than 500 pages of seemingly meaningless charts.

Helpfully, Nic has a formula for a good dossier.

“Good dossiers are maybe 100 pages long with four tabs: analytical validity, clinical validity, clinical utility, and health economics,” he says. “Have maybe a one-page sheet between each of those,” and include, “peer-reviewed studies that you've printed out and hole-punched.”

Securing a CPT or HCPCS Code Doesn’t Guarantee Coverage

In the discussion with Nic, he provides an overview of Current Procedural Terminology (CPT) codes, and Healthcare Common Procedure Coding System (HCPCS: pronounced “hick picks”) codes.

To generalize, both types of codes are used by medical professionals to identify specific procedures, services, and supplies for insurance purposes.

CPT codes are issued by the American Medical Association (AMA), and HCPCS codes are issued by the Centers for Medicare and Medicaid Services (CMS).

These codes are standardized throughout the healthcare system, to make it easy for payers to process reimbursements.

If you’ve developed a device or procedure that is so novel you feel that no existing code covers the way a physician would use it, you can apply to the AMA for a new CPT code, and to the CMS for an HCPCS code (if applicable.)

However, during his payer days, seeing a brand new CPT or HCPCS code never moved Nic to approve coverage.

“An insurance company will see a new technology, say, it's CPT code 12345 and it's HCPCS code 12346. We don't care. We're not paying for it, because we don't like your clinical evidence and you're too expensive,” he says.

In short, if you have the capacity, applying for a new code might be worth it. But if coverage is your main goal, there are more effective ways to spend your time and resources.

Payers are More Demanding than Regulators

Gathering the evidence needed to get the green light from regulators is also less strenuous than what you’ll have to do to impress payers.

“Take whatever [evidence] the regulatory affairs consultant tells you [you need], and triple it,” Nic says.

For example, if the regulator typically wants 12-month’s worth of follow-up data on 100 patients, the payer will likely want to see 36 month’s worth of follow-up data for 300 patients.

If you want a more precise estimate, Nic recommends reading payers’ medical reports on healthcare databases like Hayes, the Canadian Agency For Drugs And Technologies In Health (CADTH), and Cochrane.

“They'll say, There are insufficient long term data to support the use of such and such. You go read all the papers that they cite,” Nic says, noting that papers in this example might only give 12 months of follow-ups. He continues: “So you go, OK my customer is speaking to me: 12 months is not sufficient, even if it is sufficient for the FDA. I should probably do 24- or 36-month follow-ups.”

Again, it comes down to knowing your true client: the insurance payer.

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