While the Health Economics May Look Compelling, Who Pays for mHealth, and Why?

Posted October 8, 2020 | Industry | Leadership | Technology | Amplify
In this issue:


Heléne Spjuth examines the economics of mHealth and the resulting challenges and opportunities for all stakeholders in the healthcare ecosystem. In defining the healthcare ecosystem and its various reimbursement models, she shows the “unique circumstances that will serve either as barriers to, or enablers of, mHealth’s efficient implementation.”


There is consensus among healthcare stakeholders that mHealth interventions may reduce the cost of healthcare delivery by decreasing time to diagnosis, addressing inefficient practices, limiting the need to transport patients and healthcare workers, reducing the length of hospital stays, maintaining patients at home instead of in a costly healthcare facility, and so on. But despite optimism about mHealth as a cost-effective solution to deliver care, especially for chronic diseases such as diabetes, respiratory and cardiac diseases, and dementia, the incorporation of mHealth into established healthcare systems (i.e., healthcare providers reimbursed and financed by taxes or insurance premiums) has been slow. Many meta-analyses cite mHealth implementation constraints in reimbursement regimes as one of the top barriers, alongside a lack of evidence for mHealth’s having a more scalable, sustainable impact on health indicators.

The World Health Organization (WHO) has defined mHealth as the “use of mobile and wireless technologies to support the achievement of health objectives”; in this article, mHealth refers specifically to the practice of medicine and public health supported by mobile devices, such as mobile phones, tablets, personal digital assistants, and wireless infrastructure. mHealth encompasses all applications of telecommunications and multimedia technologies for the delivery of healthcare and health information. As such, mHealth is a subset of eHealth (telehealth is another subset, which focuses on remote access to care functionality; there are some overlaps among these subsets). mHealth also covers the use of mobile interfaces for patient self-care outside a care setting and within a hospital setting (e.g., by care personnel), allowing patients to benefit from mobile technology as well. Note here, however, that we distinguish mHealth from health/wellness apps, such as sports and fitness activity tracking, diet and nutrition, weight loss coaching, hospital selection, and appointment tracking, which are not covered in this article.

New players entering the healthcare market are soon made aware that healthcare is a rather slow adopter of new technologies, which can be a frustrating awakening, especially for those that come from fast-moving sectors like the mobile industry. Technology in health­care is often a matter of life and death. Hence, long and complex regulatory processes are involved in getting new treatments, drugs, and medtech products and solutions approved as efficient, reliable, and safe. The relatively slow adoption is due not only to the need for proof of safety, efficiency, and value but also to health­care’s conservative approach to providing med­ical treatment. Moreover, complex political deci­sion making and funding regimes affect healthcare governance.

In the current world environment, the COVID-19 pandemic has driven people, organizations, and governments to increasing digitalization as everyone tries to find alternatives to face-to-face interaction in their day-to-day lives and businesses. This increasing digitalization also applies to healthcare. Telemedicine and mHealth have played important roles in keeping patients who do not need critical care out of healthcare facilities in order to minimize the risk of unnecessary exposure to the coronavirus. During the pandemic, policy makers in many countries have relaxed obstacles to the increasing use of mHealth, such as long-standing healthcare regulations, including reimbursement constraints. In fact, in the US, Medicare has granted waivers to provide more flexibility in using telehealth services. We will likely continue to see wider use of mHealth in established healthcare post-pandemic.

Despite a lack of solid evidence, most stakeholders agree that the health economics of mHealth look compelling. If, however, mHealth implementation expands post-pandemic as an integral part of established healthcare over the long term, the question then becomes who should pay for mHealth. The answer relies primarily on two parameters: who benefits economically from mHealth and who bears the risks of healthcare costs.

Understanding the Healthcare Ecosystem

The ecosystem of any healthcare system is large and complex, encompassing many different stakeholders that vary widely among regions and between health­care systems. A simplified analysis of this ecosystem identifies its stakeholders as consumers/patients, policy makers, research centers, payers, providers, and the industry (i.e., vendors supplying pharmaceuticals, healthcare devices, and medical equipment). All these stakeholders, in different ways, benefit economically from mHealth services and, hence, play a role in the funding and implementation of mHealth. To incorporate mHealth into established healthcare systems, it is essential to understand the perspectives of all stakeholders and to secure their collaboration and support.


Although mHealth will benefit consumers’ health and well-being, consumers entitled to established healthcare don’t bear the risk of healthcare costs and most likely will not be willing to pay for mHealth solutions that exceed the cost for affordable wellness apps and wearables. Consumers will instead expect mHealth solutions, such as remote monitoring devices, diagnostic and treatment support, and telemedicine-enabling solutions, to be incorporated into the established healthcare system without any additional charges. Even though it could be argued that consumers would benefit economically by improved health and reduced loss of income due to illness, their willingness to pay for mHealth services will be limited. However, to be able to meet the rising costs of healthcare in the future, this situation must change, and consumers must take more accountability for their own health and, thus, health expenditures.

Policy Makers

Policy makers are, among other things, responsible for public health and enabling cost-effective healthcare. Therefore, they have an economic interest in creating optimal conditions for the implementation of mHealth in terms of both infrastructure and regulatory frameworks. In tax-funded healthcare systems, policy makers also bear the economic risk of healthcare costs. More­over, policy makers play an important role in enabling reimbursement for mHealth. As an example, some countries still have regulations defining a medical act as occurring only when both the patient and a physician are present in the same physical location; reimbursement is obviously possible only if a medical act, as defined, took place. With advancing technology solutions, policy makers must work to change such regulations.

Research Centers

In addition to taking part in the development of mHealth solutions and services, and in the evaluation of their long-term efficiency and safety, research and academic centers may benefit from, and have an interest in, using the data collected through mHealth apps and devices. As a result, research centers might be willing to pay for the data. However, given that this stakeholder group depends on funding from others and, typically, does not generate its own revenues, its financial capability will be limited.


Healthcare funding regimes are complex and differ greatly among countries and between healthcare systems. In more developed countries, governments (through taxes imposed on citizens) or private insurers (through premiums from their policyholders) provide most of the financing for healthcare. Limited elements of cofinancing through patient fees and, in some coun­tries, a degree of funding by employers are variations of this funding regime. In emerging countries, healthcare for much of the population is funded out of the pockets of the patients, although wealthier citizens usually have some form of healthcare insurance.

Governments and health insurance companies could benefit significantly from increasing use of mHealth solutions, as the faster diagnostics, personalized care, reduced length of hospital stays, and improved clinical outcomes that these solutions would likely make pos­sible may both reduce patients’ need for care and total healthcare costs, as well as improve public health.


When it comes to healthcare providers, the economic benefits of mHealth depend on how the healthcare system where they operate is reimbursed and what risk they bear for the cost of care. Most current reimbursement models are designed with traditional healthcare in mind (i.e., face-to-face interactions between healthcare providers and patients) and are based on the inter­actions (services) between the provider and the patient. Providers are reimbursed when a service has taken place, either by the funding government or by patients through their insurers.

The most common reimbursement model is fee-for-service. In this model, payers reimburse providers based on the services (tests, procedures, visits, hospital days, etc.) carried out on behalf of a patient over a defined period. Usually, the fee is set based on an estimated but generalized cost for a service. Determining the actual cost of every different service would necessitate an overwhelmingly complex model, and, given all the different factors that affect the cost of any healthcare service, calculating the real cost would be almost impossible. Some critics argue that the fee-for-service model, in which providers (and patients in government-funded systems or with insurance) bear little financial risk or accountability, incentivizes phys­icians to order more tests and procedures, as this will generate more income. Consequently, this model can encourage overutilization by both patients and providers and, therefore, lead to increasing overall healthcare costs over time for the payer. In addition, in a fee-for-service model, the economic incentives for healthcare providers to order only necessary services or to recom­mend mobile solutions that don’t include a reimburs­able interaction with a provider are limited, as such actions will decrease their revenue.

At the other extreme is the capitation or global bud­geting model, in which healthcare providers are reimbursed a fixed fee for every patient for whom they are responsible (per capita) within a set time frame, whether or not the patient receives care and regardless of the cost of any treatment that the patient receives. Capitation, a quality-based payment model, is intended to create a system that fosters efficiency and cost con­trol, while providing incentives for better healthcare. The counter argument is that capitation models may encourage undertreatment.

Between the fee-for-service and the capitation or glo­bal budgeting models are a vast variety of reimbursement models, with various degrees of pas­sing the financial risk burden from payers to providers. Some other examples of quality-based reimbursement models, in which the risk is passed on to the provider, are:

  • Pay-for-coordination. To manage a unified care plan for patients and to ensure efficiency and quality, a primary care physician leads and coordinates care between multiple providers and specialists.

  • Pay-for-performance. Healthcare providers are incentivized to meet certain quality and efficiency indicators, and reimbursement is based on the achievement of these performance measures.

  • Episode-of-care payment. Healthcare providers are reimbursed a set amount to pay for a specific episode of care. Providers keep any realized net savings but are accountable and bear the financial risk of any complications within a set period.

  • Shared savings program. A group of physicians (e.g., accountable care organizations) provides population health management through coordinated team care and any realized net savings are returned to the provider.

In countries and systems where established healthcare is reimbursed, in whole or in part, through any of the quality-based reimbursement models, the incentives for providers to pay for mHealth will most likely be higher, as providers under these models bear the financial risk. As such, the providers are the economic beneficiaries of the more cost-effective mHealth solutions, which may lower their cost of delivering healthcare.

The reimbursement models mentioned here constitute just a fraction of the innumerable types of existing reimbursement models, and the way in which health­care cost risks are distributed between providers and payers varies from one model type to the next.


Vendors that supply medicines and medical devices and equipment could benefit economically from mHealth services. For example, a quicker diagnosis could mean that patients receive medicine or an implanted device sooner. mHealth apps that pro­vide medical reminders would be beneficial to pharmaceu­tical companies, as they would encourage patients to stick to their medication regimens. The industry stake­holder group is a financially strong player, willing to invest to increase the value of its products and to offer added value free of charge or as a bundled deal in exchange for the promise of higher market share in a given segment. In recent years, partnerships and innovation agreements between industry and established healthcare have become more and more common, with products being bundled with services and solutions. The industry has taken a role in the co-funding implementation of mHealth services in established healthcare systems.


This article has defined the healthcare ecosystem and the various reimbursement models in their simplest forms; there are many variations and combinations of each that result in unique circumstances that will serve either as barriers to, or enablers of, mHealth’s efficient implementation. To be successful, mHealth vendors entering the market must do their homework to under­stand the needs and drivers of key stakeholders in the healthcare ecosystem and which entities bear financial risk. Next, they must evaluate which country, region, or healthcare system they want to approach. The US, the UK, Germany, Denmark, Canada, and the Netherlands are generally perceived as attractive markets for imple­menting mHealth services, some due at least in part to market size, but collectively because of access to investors and clinicians’ acceptance of apps. However, these markets vary greatly both in how healthcare is governed as well as in how it is financed, so the approach will have to be adjusted accordingly.

In countries or systems with fee-for-service reimbursement models, the payer will most likely be the government or insurance companies, but with capitation or other quality-based models, the payer is more likely to be the providers. The trend of moving from fee-for-service to reimbursement for quality and value means that mHealth providers must aspire to prove the long-term value, even post-pandemic, of mHealth’s being incorporated into reimbursable healthcare services.

The bundled agreements, in recent years, between industry stakeholders and established healthcare systems can also play a role in incorporating mHealth services into the established healthcare system, mean­ing that mHealth vendors should aspire to also enter partnerships with industry stakeholders. An upside for industry stakeholders is that they already have a strong and established network with important healthcare ecosystem stakeholders and have existing sales channels.

Integration of mHealth services into the established healthcare system will not depend on only one stakeholder group but will be a team effort involving the entire ecosystem. This integration effort will require regulatory and operational changes, partnerships, patience, and perseverance. Research centers will play an important role by conducting studies to provide policy makers with evidence of the long-term efficiency and benefits of mHealth. Policy makers, in turn, will have to bring about regulatory changes to enable market access for mHealth services by minimizing barriers in infrastructure and reimbursement regimes. They will also have a key responsibility to inform and educate citizens about how to be more accountable for their own health and well-being. Otherwise, patients’ contribution to the funding of mHealth services will continue to be limited to low-cost wellness apps. Payers must secure flexible reimbursement models that incen­tivize preventive and remote healthcare. Providers will have to make operational changes, with a shift away from traditional, reactive healthcare based on treating patients in face-to-face interactions. Finally, if the eco­system collaborates, even post-pandemic, the inte­gration of mHealth into established and reimbursed healthcare services will continue and expand.

About The Author
Helene Spjuth
Heléne Spjuth is a Manager at Arthur D. Little (ADL), based in Sweden, and a member of ADL’s Healthcare & Life Sciences practice, where she focuses on eHealth, digitalization, and information management in healthcare and the public sector. Ms. Spjuth has 20+ years’ experience in Nordic/European health and social care, including multiyear experience on the payer side of healthcare with an expertise in analytics, epidemiology, eHealth, and… Read More