Publication | ThinkSet

Why Reimbursement for Telemedicine Services Needs to Change

JoAnna Younts

Winter 2019

The technology works. Docs get it. Now we need payers to buy in. Here’s why.

An 85-year-old woman has several health issues, some of which require careful monitoring by physicians. She lives in a rural zip code, several hours’ drive from the nearest hospital. That makes it difficult to get the specialized regular attention she needs, which includes regularly checking her pacemaker.

This hypothetical woman is the perfect candidate for telehealth—a practice increasingly being embraced by medical practitioners who see its potential to help millions of Americans. Virtual patient engagement is a big part of that, as is the ability to monitor patients’ health in real time, assist in adjusting care on the spot and even providing real-time diagnoses. And that’s just for starters.

At the BRG Healthcare Leadership Conference in December, I moderated a panel on the increasing use (and accompanying challenges) of telemedicine. The biggest takeaway from our expert panelists was this: the expected increase in remote patient monitoring and other telehealth services in the coming years must be accompanied by changes in the way those services are viewed and reimbursed by insurers.

Specifically, we need to stop thinking of telemedicine as just another distinct service or treatment and understand that it’s a tool for patient engagement, like email or the telephone. Treating it as such will make telehealth services cost-effective for patients, providers and payers alike.

Doctors Increasingly Buy In, But Payers Stall on Telemedicine Reimbursement

The potential avenues for helping the woman in the hypothetical above (and those like her) were unthinkable a generation ago. Now, she could converse with doctors over an app on her phone, eliminating trips to the doctor’s office. Or, if she needed to be transported by ambulance, medics could communicate with ER doctors en route, even deciding whether another setting would serve her better.

Those examples are more than theoretical—and the results are real too. Telemedicine is expected to be a $36.2 billion global industry by 2020—up from $14.3 billion in 2014.

Among others, doctors are increasingly on board and the “pendulum has swung to really embrace telemedicine,” wrote Nathaniel M. Lacktman, chair of the national Telemedicine & Digital Health Industry team at law firm Foley & Lardner, in a report last year. “Health care providers, entrepreneurs, and patients alike have realized the potential to improve the quality of care in a more convenient, cost-effective manner which, in turn, has put pressure on the payer community to evolve their reimbursement strategies.”

Though most doctors now see that telemedicine saves money while providing more efficient care, payers have yet to fully embrace it. They still regularly look at telemedicine as a discreet service, separate from normal treatment (i.e., members receive a service, health plan pays a fee). And that’s holding back telemedicine adoption, as demonstrated by the fact that nearly 60 percent of healthcare providers surveyed by Foley in 2017 listed a lack of third-party reimbursement as a challenge in implementing telemedicine within their organizations.

Reimbursement for Telemedicine and Other Challenges

How are doctors who provide care through telemedicine reimbursed? In the pre-telemedicine era, the cost of a doctor calling to follow up after surgery would have been included in the patient’s total payment. With telehealth, consultations and video chats often have individual telehealth Current Procedural Terminology (CPT) codes; the providers bill for these individual virtual interactions. Telemedicine coding and billing varies by state and by each individual plan—which is problematic. Ideally, providers should be paid a bundled fee for patient care, not for individual service, as telehealth typically works better in this reimbursement model. For example, some accountable care organizations (ACOs) have figured out that they can provide higher-quality care to their populations while also achieving cost savings by incorporating telehealth into their service mix.

At the same time, the buzz in healthcare about value-based payment methods isn’t yielding results by way of plans that cover telehealth with enough regularity. Regulations surrounding telemedicine coverage have been somewhat relaxed over the years, as both Medicare and Medicaid pay for virtual appointments the same way they would if you were actually at the doctor’s office. But many private plans are still stuck in the fee-for-service mindset, not thinking about the real purpose of telemedicine—to take care of a population, keep people from going to the hospital and provide care to underserved populations.

These problems will need to be addressed in the coming years, if for no other reason than the graying of America. According to a Popular Reference Bureau report from 2015, the number of US residents 65 and older is anticipated to more than double to over 98 million by 2060. As this number continues to increase, telehealth will become more important than ever and will continue to evolve with changing populations—payers and providers need to do the same.

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JoAnna Younts

Managing Director

Washington, DC