As Part 2 of our Healthcare Reform Series, we’ll give you the rundown of what, how, and why reform is shaping the telemedicine market. One analyst estimates that the global telemedicine market will reach $36.3B by 2020, and this attractive market is catching the eye of investors and healthcare providers so that one day patients can receive world-class care from anywhere. However, the future of telemedicine is dependent on reimbursement and regulatory policies both at the federal and state level. Policy makers have historically been slow to embrace telemedicine, but a number of bills in the pipeline could fuel massive adoption by payers, patients, and providers.
But first, time out. What is telemedicine? According to the Health Resources and Services Administration, telemedicine refers to real-time, face-to-face audio/visual communication with a healthcare provider. Telehealth is the umbrella term that includes telephone calls, remote patient monitoring, and store-and-forward imaging (capturing an image or video for review by a healthcare provider at a later date), though most organizations use these terms interchangeably.
Let’s take a look at key legislation that has shaped telemedicine to date.
- The Balanced Budget Act (BBA) of 1997 authorized partial Medicare reimbursement for telehealth services in rural areas with healthcare professional shortages. However, strict restrictions provided reimbursement for “live” services where Medicare practitioners are required to be present with patients, which only account for 10% of telehealth services.
- The Benefits Improvement and Protection Act (BIPA) of 2000 expanded payment for telehealth services. It removed the need for a telepresenter to accompany the patient and expanded eligible geographic areas from rural health professional shortage areas to include counties not in a metropolitan statistical area.
- Beyond promoting the adoption and meaningful use of EHRs, the HITECH Act also promoted adoption of health IT infrastructure and enhanced privacy and security requirements. This helped lay down the foundation for telemedicine adoption. For instance, communities can receive awards to install and set up telemedicine services through the Beacon Community Cooperative Agreement Program.
According to a survey of healthcare executives, 41% of respondents do not receive reimbursement at all for telemedicine services. Medicare will only reimburse face-to-face video interactions that mimic in-person physician visits, and the patient must call in from a medical facility and reside in a designated Health Professional Shortage Area (HPSA). As of 2015, CMS expanded the list of covered services to include annual wellness visits and psychotherapy but expects overall Medicare payments for telehealth to increase only 0.8% this year. Although Medicare coverage remains restrictive, as of September 2014, 47 states do offer some level of Medicaid telehealth reimbursement and 21 states require private insurers to also reimburse telehealth services. States can limit coverage based on a number of criteria including provider type, patient type, technology format, location, and type of service; however, unlike Medicare, Medicaid laws in 23 states and D.C. have expanded the scope of telemedicine by not specifying a patient setting or patient location as a condition for payment.
The idea of having e-consults between physicians, virtual doctor visits, store-and-forward, and remote patient monitoring has been around for years. But technological improvements have enabled a whole new generation of telemedicine services, whether that’s via texting, email, or via mobile app. According to a survey by the American Telemedicine Association in 2014, the top telemedicine delivery methods were video (77%) and audio (57%).
Telemedicine funding exploded this past year, reaching $289M as more consumers and providers become comfortable with telemedicine. Investors also have good reasons to be excited with a number of bills in Congress that could open the floodgates for telemedicine reimbursement and adoption. In the 113th Congress alone, 57 bills were introduced to change current policies. Here are a few upcoming bills to keep an eye out for:
- Medicare Telehealth Parity Act: Phase 1 works to expand coverage for real-time and store-and-forward services. Phase 2 extends telehealth access to metropolitan areas and coverage of home health services.
- Telehealth Enhancement Act of 2014: The act aims to greatly expand Medicaid coverage by removing geographic eligibility for critical access and sole-community hospitals. It may also include coverage for home-based video care services at hospices, home dialysis patients and homebound seniors, and telehealth services for women with high-risk pregnancies.
- TELE-MED Act: Allows Medicare providers to treat patients across state lines without needing to obtain multiple state medical licenses. Patients would have access to their doctor of choice, regardless of geographic location.
- 21st Century Cure Act: The act would require telemedicine services to prove cost neutrality, if not savings, in order to seek reimbursement from CMS. With this additional time-consuming hurdle, this could greatly deter and slow the expansion of telemedicine.
We expect to see heightened activity on the state level. New York recently passed the landmark Telehealth Reimbursement Bill requiring that Medicaid deductibles, coinsurance, and other coverage conditions for virtual visits match in-person service coverage. Similarly, Tennessee passed telemedicine parity legislation that goes into effect in this year and focuses on expanding Medicaid coverage, including managed care and state employee plans. Arizona is also a longstanding telemedicine leader and currently covers the most extensive list of store-and-forward services including dermatology, ophthalmology, and surgery follow-ups. Of the 25 states that have developed State Health Innovation Plans with federal government support, 19 of them want to use a portion of resources to focus expanding telehealth services. However, not all states believe telemedicine delivers equivalency. In January, the Texas Medical Board implemented a new rule that requires physicians in Texas to have met with patients in-person prior to treating via telemedicine. (The rule does not apply to mental health services.) But Teladoc was able to win a temporary reversal on the state’s emergency rule.
As the uncertainty around reimbursement continues to shake out, companies have tried a variety of delivery methods and business models to bring telemedicine services to patients.
Studies have shown care delivered via telemedicine can be as effective as in-person visits and reduce costs. While the cost savings magnitude is not yet conclusive, a study by Towers Watson claims that U.S. companies could save $6B on healthcare spending per year. The promise of telemedicine yielding improved care and cost savings is still attractive to more than just Medicaid, and a number of private insurers and self-insured employers are jumping on board as well. The same Towers Watson study reported that 20% of employers surveyed currently offer telemedicine consultations to their employees as an alternative to ER or physician visits for non-emergency health issues, and 34% are considering offering telemedicine to their employees in 2016 or 2017. However, before telemedicine becomes a widespread treatment option, policy makers will need to address the following areas of concern:
- State licensing: According to an update from Federation of State Medical Boards (FSMB) in January 2015, 47 state boards require physicians to be licensed in the state where the patient is located, and only 13 state boards issue a special purpose telemedicine license for telemedicine practice across state borders. Many states make exceptions for physician-to-physician consultations if the referring doctor is licensed, but licensure requirements that limit physicians to see patients in the same state need to extend across state borders in order for telemedicine to scale and remain cost effective, especially in rural states that have a shortage of physicians. Additionally, another challenge is that telemedicine crosses all medical professions and each profession has different licensures.
- Reimbursement coverage: Coverage policies are not yet defined for telemedicine. Definitional clarity is needed on the types of services covered and their reimbursement rates compared to in-person services. The Telehealth Parity Act aims to clarify this discrepancy, but each state will need to set its reimbursement rates as well. The same FSMB report cited that only 19 states require both private insurance companies and Medicaid to cover telemedicine services to the same extent as face-to-face consultations.
- Quality/scope: There is no consensus on the type of medical services that can, and should, be offered using telemedicine. For example, the recent Google Helpouts failure illustrates how not setting clear parameters on the scope of care hinders health professionals’ ability to deliver quality care and sets unrealistic patient expectations. There needs to be a standard of care for telemedicine that clearly determines the services that can be virtually delivered, both effectively and safely, and the services that will still require a physical visit. In April 2014, the FSMB adopted a model telemedicine policy, which 10 states have adopted. However, no states have implemented a formal telehealth law, so more work is required on defining the standard of care.
- HIPAA compliance: Patient privacy remains a primary concern for telemedicine. Before patients virtually connect with their doctor, telehealth providers must guarantee the same level of privacy assumed in a physical doctor office. HIPAA encrypted systems do exist, but CMS has not officially regulated the use of telemedicine communication platforms.
- Fraud and abuse: Under the Anti-Kickback Statute, it is illegal to knowingly pay, offer, or solicit referrals or services reimbursed by CMS. Given that telemedicine historically involves sharing equipment or products across unrelated health entities, providers must be careful not to misalign incentives. Telemedicine may be exempt under certain safe harbor laws, but until the laws are made clearer, providers must tread carefully.
Telemedicine was the fastest growing category in digital health in 2014 at 315% year-over-year growth—and patients like it too. And we know it’s working. The VA saw great success with their telehealth initiatives, with surveys reporting a 94% satisfaction rate for clinical video telehealth. In FY2015, an additional $23M in funding will be available for the department to expand their telemedicine services. Ross Friedberg, General Counsel and Chief Privacy Officer at Doctor on Demand, believes patients will be a key driving force in telemedicine adoption. “After years of slow progress, telehealth is beginning to show great potential. While the landscape for telehealth remains challenging due to complex and outdated laws and the fact that telehealth is still new and unfamiliar to many people, these obstacles are being outweighed by the demands of a public that is increasingly fed up with status-quo healthcare and technology that makes telehealth easily accessible to nearly everyone that owns a smartphone, tablet or computer.”
Despite the reimbursement limitations and policy concerns, we are excited about telemedicine. The thought of having access to a medical professional whenever and wherever you are is no small feat. With the influx of funding to telemedicine companies, we expect the list of services offered virtually to expand and a better alignment of healthcare professional supply and demand. For example, 1DocWay offers a platform that helps patients in rural America access telepsychiatry services. Coupled with the wave of new at-home diagnostic hardware accessories, like CellScope, CliniCloud, and Cue, the scope of care that can be delivered over telemedicine will expand. It’s also worth noting the opportunity for telemedicine extends beyond the traditional physician-patient relationship. For example, telepharmacy companies like TelePharm are leveraging video conferencing technology to extend access to rural pharmacies and help lower the overall cost of pharmacy services. Despite these innovations, the overall question remains whether the federal and state governments will be able to create laws and reimbursement policies to sustain telemedicine business models and incentivize user adoption.
This post was the second installment of a 4-part Healthcare Reform Series.
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