Why a little-known policy change has big implications for medtech

The U.S. Department of Health and Human Services (HHS) has announced a major initiative that could materially improve the operating environment for medical technology companies. In a joint statement by HHS Secretary Robert F. Kennedy Jr. and CMS Administrator Dr. Mehmet Oz last week, more than 50 private health insurers - collectively covering over 250 million Americans - pledged to reduce the scope and burden of prior authorization requirements by 2026.

The direction of travel is clear: less red tape, greater standardisation, and faster access to care. From our perspective, this shift represents a meaningful structural tailwind for the medtech sector.

Understanding pre-approvals and their role in care delivery

Prior authorizations (or pre-approvals) are administrative checks used by insurers to manage utilisation. Before certain procedures, treatments, or diagnostics are carried out, providers must obtain insurer approval based on submitted documentation of medical necessity. While intended as a cost-containment mechanism, in practice it often functions as a bottleneck in care delivery. It often delays treatment, discourages utilisation, and increases administrative burden on clinicians and health systems.

From a healthcare perspective, this represents friction. Every step that slows a procedure or creates uncertainty in reimbursement diminishes the likelihood that a device or diagnostic will be selected, reimbursed, or adopted at scale.

Relevance to medical technology

The new CMS-led reforms aim to reduce the number of services subject to prior authorization, increase transparency, implement real-time approvals by 2027, and create a unified digital standard for electronic submissions. While implementation will be uneven and depend on insurer follow-through, even incremental progress in these areas stands to benefit the medtech ecosystem.

By reducing administrative overhead, CMS is not only improving patient access, but also unlocking latent demand for proven, reimbursed technologies. This is especially important in categories where procedure volumes directly correlate with revenue for medtech providers.

One clear beneficiary could be Stryker (NYSE: SYK), which is one of the global leaders in knee arthroscopy procedures. Stryker's knee arthroscopy was one of the procedures explicitly identified for pre-approval elimination in early musings of the shift. 

Looking a little bit closer to home, cochlear implants are another procedure subject to strict pre-approval regulations. This process involves submitting detailed medical documentation, such as audiological evaluations and physician notes, to demonstrate medical necessity. Cochlear (ASX: COH) notes that prior authorizations typically take 15–30 days for a response from health plans, with pre-determinations potentially taking up to 30 days on average. 

Reducing friction in these high-volume categories would support both procedure growth and adoption of advanced implant technologies.

Longer-Term signals: a shift toward technology-led care

While the pre-approval changes are operational in nature, the broader policy language indicates a growing openness to technology-driven healthcare models. 

Secretary RFK Jr. remarked that his “vision is that every American is wearing a wearable within four years”. 

While this comment is clearly aspirational, it underscores a shifting mindset in Washington. The move from episodic care to continuous monitoring, especially in areas such as cardiometabolic disease, could meaningfully increase demand for connected diagnostics, remote monitoring tools, and consumer-grade health technology.

The alignment of the political narrative with technological infrastructure may create an environment in which policy, payer incentives, and patient behaviour converge to support expanded medtech adoption.

Implications for investors

We believe these developments are constructive for the medtech sector broadly. They lower one of the more persistent structural frictions in U.S. procedure volume growth. In a sector where access, utilisation, and reimbursement are tightly linked, any reduction in administrative drag supports more stable, visible revenue streams.

For investors, this policy shift strengthens the long-term investment case for companies with exposure to high-frequency procedures, outpatient surgical settings, and digital health monitoring. As these regulatory changes progress, we will continue to monitor their uptake and evaluate how they translate to procedural volume, pricing stability, and device penetration.

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