COVID-19 has arguably permeated all facets of healthcare delivery, with one manifestation of those changes recently propagated by the Centers for Medicare & Medicaid Services (CMS). In adopting the American College of Cardiology’s (ACC)[1] recommendation, CMS now temporarily[2] permits direct supervision[3] of cardiac rehab “using virtual presence of the physician through audio/video real-time communications technology[.]”[4] In making this change, CMS has transformed the well-established concept of “direct supervision,” previously defined as requiring “the physician [to be] immediately available to furnish assistance and direction throughout the performance of the procedure.”[5] This flexibility for physician supervision of cardiac rehab services fits within the overall trend[6] for reimbursement of certain services delivered via a telemedicine platform, and has emerged as a significant tool in the fight against diminished resources for cardiac rehab programs.[7]

Generally, telehealth and telemedicine represent a transformative healthcare delivery model whereby services are delivered and managed using technology platforms (e.g., mobile devices, computers, etc.). Such advents made possible by telehealth and telemedicine include remote patient monitoring and electronic consultations (e.g., video conferencing, “store-and-forward” communication, etc.). In this vein, telehealth and telemedicine facilitate on-demand access to healthcare and increased convenience to the patient.

Select leading professional societies, including the American Association for Cardiovascular and Pulmonary Rehabilitation and the American Heart Association, are advocating for CMS to permanently allow virtual supervision for cardiac rehab. These societies have endorsed this flexibility in supervision, noting that “[t]he inclusion of direct supervision via virtual presence has improved access for patients during the PHE. It has allowed the relocation of [. . . ] cardiac rehabilitation services from the hospital to satellite locations where there is not an MD or DO physically available.”[8] Owing to these expanded virtual supervision rules, programs such as the mobile-based technology cardiac rehab program pioneered by Duke University Medical Center may become more commonplace in the near future.[9]

  FMV PITFALL

Whether in the context of cardiac rehab or another modality, the use of telemedicine is becoming more commonplace, and compensation for cardiac rehab arrangements based upon valuation methods applicable to on-site supervision may no longer represent fair market value for virtual supervision. Having assisted clients with hundreds of telemedicine services arrangements over the years, HealthCare Appraisers has stayed at the forefront of this emerging trend and is well suited to assist clients with their particular telemedicine compensation and virtual supervision compensation arrangements.

Emerging as an essential tool in the efforts to combat the novel coronavirus (COVID-19), the telemedicine industry is expected to reach $155 billion, growing at a compound annual growth rate of over 15 percent through 2027.[1] This article provides background information on the telemedicine industry, insight into what has been driving growth of this industry, as well as recent market activity. Lastly, we discuss the valuation considerations associated with the telemedicine industry including the approaches to value, and how they are applied in the context of telemedicine service arrangements, businesses, intellectual property, and capital assets.

  BACKGROUND

Telemedicine is a subset of the telehealth industry which broadly refers to the application of technology to healthcare. Telemedicine is a means of delivering medical professional services via the use of electronic communication systems and software. This method of care was originally employed to deliver medical services remotely for rural areas of the country. However, improvements in technology and changing consumer preferences have propelled telemedicine to be adopted widely in other areas of the country.

As COVID-19 continues to make its way around the globe, a clear path has been paved for the telemedicine industry to take flight. The technological infrastructure already in place by telemedicine companies permits healthcare providers to provide virtual consultations during which they can collect information on patients’ symptoms and, subsequently, provide patients with a recommended course of action (e.g., self-quarantine, in-person follow-ups, etc.). Telemedicine consults not only eliminate the need for patients with mild symptoms to go to a physical doctor’s office or hospital, but they can help reduce the prospects of receiving a costly healthcare bill. According to an analysis released by UnitedHealth Group, the average cost of treating common primary care conditions at a hospital emergency department is approximately 12 times higher than when treated at a physician office.[2] 

However, with such an extraordinary and abrupt surge in patient usage of telemedicine offerings, telemedicine companies are struggling to meet demand as their infrastructure is stretched beyond its capacity, leading to the need for platform upgrades. With various telemedicine providers such as the Cleveland Clinic reporting a 15-fold increase in telehealth visits due to COVID-19,[3] telemedicine companies are now rushing to find the clinical staff necessary to meet consumer demand. While telemedicine offers a much needed alternative to in-person care during a time full of uncertainties, there are various limitations of telemedicine in the fight against the spread of COVID-19, including, but not limited to, the inability to perform physical virus testing, and provide bedside availability for acutely ill patients whose symptoms may worsen. As the world is forced to adapt and evolve due to the uncertainties associated with the spread of COVID-19, it is conceivable that the virus will expedite the adoption of telemedicine as we continue to see consumers utilize this technology for the first time.

Many of the prior challenges associated with reimbursement have been addressed as a response to COVID-19, as CMS expanded Medicare reimbursement for telehealth services in the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). While most states have passed laws that govern private payor telehealth reimbursement policies (outlined in Figure 1), the CARES Act will reimburse clinicians for provision of telehealth services to its patients including mental health counseling, common office visits, and preventative health screenings. Previously, Medicare beneficiaries would only receive coverage for routine services in certain circumstances, such as if they lived in a rural location. This is important given that Medicare beneficiaries are typically more vulnerable to COVID-19.

The Health and Human Services Secretary Alex Azar has called upon states to loosen regulations allowing doctors and medical professionals to practice across state lines. Furthermore, in a letter from CMS to clinicians on April 7, 2020,[4] CMS provided additional workforce flexibilities by temporarily waiving Medicare and Medicaid’s requirements that physicians be licensed in the state where they are providing services, in order to contribute to COVID-19 relief efforts. Historically, physicians had to obtain a license for each state they were practicing medicine in, which meant that physicians would be unable to provide telemedicine services across state lines unless they were licensed in the appropriate state. The Interstate Medial Licensure Compact (IMLC) was created to make it easier for physicians to obtain licenses to practice in multiple states, and further increase access to healthcare for patients in rural or underserved communities. Currently, 29 states, the District of Columbia, and the Territory of Guam are members of the IMLC.

Another hinderance to the adoption of telehealth is the lack of access to broadband internet in rural areas and Tribal Lands where over 19 million households lack access to “fixed terrestrial advanced telecommunications” capability.[5] The CARES Act allocates $100 million to the U.S. Department of Agriculture’s Rural Utility Services for its Reconnect Pilot Program to help expand broadband service in eligible rural areas.[6]

Even with these various challenges in the telemedicine industry, several tailwinds will support the growth of the telemedicine industry in coming years as discussed in the following section.

  OUTLOOK

According to IHS Markit Ltd, physician demand will grow faster than supply in the U.S., leading to a projected primary care and non-primary care shortfall of between 46,900 and 121,900 physicians by 2032.[7] The primary reasons behind the shortage of physicians are an aging workforce combined with an aging population which will generally require more healthcare services. More than two out of five active physicians will be age 65 or older within the next decade, with over 40 percent of the physician workforce expected to retire over the next decade.

The use of telemedicine is able to alleviate the physician shortage in many ways. The increased access to preventive care through telemedicine may help prevent emergency room visits, while remote patient monitoring has the ability to help reduce hospital admissions, re-admissions and emergency room visits.[8] Telemedicine may also benefit rural communities through efficient utilization of physician resources. Specialty physicians who have excess availability may treat patients outside of their typical markets, benefiting both physicians and patients alike. Lastly, telemedicine companies have increased the efficiency of providers by using the power of artificial intelligence to help triage/diagnose patients. 98point6, a text-based telemedicine start-up company, recently raised $43 million (total money raised of $129 million) to expand its AI-powered services which are able to perform tasks such as determine the most relevant information to gather from patients, in a natural dialogue format. While telemedicine can help alleviate the shortage of physicians, telemedicine companies face issues in adding and training their providers to scale their platforms.

Apart from the challenges related to the projected shortage of health care professionals, there are also compounding challenges with the aging population. The U.S. population under the age of 18 is projected to grow by only 3.5 percent, however the population aged 65 and over is projected to grow by 48 percent between 2017 to 2032.[9] The development of chronic disease is often associated with, and more common among, older age groups. The Centers for Disease Control and Prevention (CDC) estimated that about 60 percent of all adults in the U.S. have a chronic disease and that 40 percent have two or more.[10] Remote patient monitoring can reduce the cost of chronic disease management. Doctors and specialists can use video, audio, and other digital tools to manage a patient’s condition remotely, reducing the need for in-person consultations. With a higher concentration of elderly population living in rural areas, transportation and mobility challenges can be partially mitigated with the use of telemedicine.

The prospect of better patient care at lower costs is a major catalyst for the adoption of telemedicine. According to a study conducted by researchers at Boston-based Massachusetts General Hospital (MGH), the effectiveness of in-person and virtual visits was found to be equal.[11] According to a recent American Journal of Critical Care report, more than 1,200 nurses responded to an online survey where about 79 percent agreed tele-ICU systems enable nurses to improve patient care, and approximately 75 percent agreed it improves job performance.[12]

From a cost perspective, operational efficiency and better patient outcomes achieved through providing medical services via telemedicine can result in material cost savings. This model of care helps providers cut down costs by increasing physician availability and productivity. Providers that leverage telemedicine as part of their continuum of care can help provide care sooner, resulting in fewer procedures, shorter hospital stays and fewer medical office visits for patients.[13] According to a study performed on 650 patients using the JeffConnect telemedicine platform at Philadelphia-based Jefferson Health, the net cost savings to the patient and payor per telemedicine visit ranged from $19 to $121 per visit.[14] When compared to the $49 per consult rate of the platform, the cost savings can be material. Additionally, the study also indicated that the majority of the cost savings were generated through diverting patients away from emergency departments.

The use of telemedicine will ultimately lead to not only better outcomes, but cost savings for patients and providers. As the healthcare provider industry moves towards a value-based reimbursement model, it will become increasingly important to find cost and operational efficiencies where available. While there are still challenges to be addressed ranging from EHR integration to privacy concerns, telemedicine is a technology that will become more widely accepted as patients, providers, and payors realize the benefits of this technology.

Many of the “temporary” measures to facilitate telemedicine adopted by the government and private payors may become permanent features of the healthcare marketplace. In relation to new telemedicine developments associated with COVID-19, CMS administrator Seema Verma has stated: “I think it’s fair to say that the advent of telehealth has been just completely accelerated, that it’s taken this crisis to push us to a new frontier, but there’s absolutely no going back.”[15] Furthermore, in May of 2020, BlueCross BlueShield of Tennessee updated its policies to permanently reimburse member-to-provider and provider-to-provider telemedicine consultations for in-network providers.[16]

  APPLICATIONS OF TELEMEDICINE

The stakeholders in the telemedicine industry have developed unique models to deliver clinical care, driven by economies of scale, use of medical devices and population health analytics, among other factors. Furthermore, the use of telemedicine is not limited to any one branch of medicine and is currently being used in specialties such as primary care, critical care, neurology, psychiatry, radiology, as well as for prescribing medications and home health services. Typically, a telemedicine platform can facilitate two types of consultations: synchronous or asynchronous. The American Telemedicine Association (ATA) defines synchronous telemedicine as, “interactive video connections that transmit information in both directions during the same time period” and defines asynchronous telemedicine as, “store-and-forward transmission of medical images and/or data because the data transfer takes place over a period of time, and typically in separate time frames. The transmission typically does not take place simultaneously.” Asynchronous and synchronous telemedicine are different in terms of time, costs, and provider involvement. Additionally, telemedicine can typically be broken down into three modalities, which include videoconferencing,[17] remote patient monitoring, and store-andforward. The most common uses of telemedicine, by specialty, are outlined in Figure 3.[18] There’s generally a large gap in physicians’ willingness to use telehealth and their actual telehealth usage. According to a survey published by American Well, the top barriers to physician telehealth usage are due to uncertainty around reimbursement and questions about clinical appropriateness. As noted earlier herein, payors have taken steps to permanently provide reimbursement for telemedicine services as a result of developments from COVID-19. Similarly, given limited alternatives, providers have sought to develop clinical pathways that utilize telemedicine technology to treat patients during periods of required social distancing.

  DISCLAIMER:

This FMVantage Point contains a general discussion of current issues and developments regarding Coronavirus disease 2019 (“COVID-19”). The information provided in this article does not, and is not intended to, constitute legal advice; instead, all content in this article is for general informational purposes only.

  NEW DEVELOPMENTS:

Much remains unknown about COVID-19, but one thing is clear: telemedicine has emerged as a key tool to combat the disease and ensure continuity of care during periods of “social distancing.” On March 13, 2020, President Trump declared a national emergency[i] under the Stafford Act.[ii] Using the powers granted by the declaration,[iii] the Centers for Medicare & Medicaid Services (“CMS”) has broadened access to Medicare telehealth services. On March 17, 2020, CMS published a fact sheet clarifying the changes regarding reimbursement for telehealth services that would be adopted. In this fact sheet, CMS acknowledged that “…with the emergence of the virus causing the disease COVID-19, there is an urgency to expand the use of technology to help people who need routine care, and keep vulnerable beneficiaries and beneficiaries with mild symptoms in their homes while maintaining access to the care they need.”[iv] Below, we have summarized a few of the key changes that were discussed in the fact sheet:

  Medicare beneficiaries originally were eligible to receive telehealth services as a Medicare covered service if they were located at one of eight types of qualifying originating sites (e.g., hospital or physician office). Furthermore, the beneficiaries needed to be in a rural area or health care professional shortage area. Now, beneficiaries can receive telehealth as a covered service regardless of marketplace and regardless of setting (e.g., a beneficiary’s place of residence).

  The Department of Health and Human Services (“HHS”) Office of Inspector General (“OIG”) is providing flexibility for healthcare providers to reduce or waive cost-sharing for telehealth visits paid by federal healthcare programs.

  HHS is announcing a policy of enforcement discretion for Medicare telehealth services. For example, HHS will not conduct audits to ensure that patients receiving telehealth services had a prior relationship with a particular practitioner with respect to claims submitted during the public health emergency.

  Medicare will still require telehealth services to be delivered through the means of technology with live audio and visual capabilities. Providers are now authorized to use telephones that have audio and video capabilities for the furnishing of Medicare telehealth services during the COVID-19 public health emergency. In addition, effective immediately, the HHS Office for Civil Rights will exercise enforcement discretion and waive penalties for HIPAA violations against health care providers that serve patients in good faith through everyday communications technologies, such as FaceTime or Skype, during the COVID-19 nationwide public health emergency.[v]

The guidance above applies to telehealth services and does not apply to the new virtual visits (CPT codes G2012 and G2010) established as part of the Medicare Physician Fee Schedule Final Rule for Calendar year 2019. Outside of the efforts undertaken by Medicare, some private insurers announced they would waive fees for virtual visits of people who may have the virus and may eliminate cost-sharing for telemedicine visits in general, over the short term.[vi]

  FAIR MARKET VALUE PERSPECTIVE:

Based on these recent developments, we anticipate that the demand for telemedicine services will increase along with increased reimbursement for such services. The following considerations may impact the fair market value (“FMV”) of telemedicine arrangements:

  We have valued many telemedicine contracts where healthcare providers are compensated at cost (plus a reasonable margin) for their services given the shortfall in professional services revenue to offset costs. With the increased ability to bill and collect, the original payment rates contained in telemedicine services arrangements may result in compensation that exceeds FMV.

  Given the efforts to promote “social distancing,” the demand for telemedicine services of all modalities is likely to increase at a very fast pace. Current providers of telemedicine services may see spikes in demand that may impact the market rates for such services.

  Technology costs often function as a deterrent for medical practices to adopt telemedicine as a modality of care. By enabling the use of phones and free software (such as FaceTime or Skype) to perform telemedicine services, Medicare is temporarily reducing a key barrier to entry. This may increase the supply of telemedicine providers.

While most of the changes proposed by Medicare and private insurers are intended to be temporary, a short-term transition into telemedicine services may result in the long-term adoption as a modality of care.[vii]

Having valued hundreds of telemedicine services arrangements, HealthCare Appraisers stands ready to assist clients with any telemedicine services needs. A brief list of essential resources for staying up to date regarding the telemedicine industry and its reaction to COVID-19 can be found below:

  HealthCare Appraisers – Telemedicine Insights: https://healthcareappraisers.com/category/telemedicine-insight/
  American Telemedicine Association – COVID-19 Portal: https://info.americantelemed.org/covid-19-news-resources
  CMS – Current emergencies landing page: https://www.cms.gov/About-CMS/Agency-Information/Emergency/EPRO/Current-Emergencies/Current-Emergencies-page
  Southwest Telehealth Resource Center – Telemedicine COVID-19 Resources page: https://southwesttrc.org/resources/covid19 and Service Provider Directory: https://telemedicine.arizona.edu/servicedirectory

Author: Kevin Cassell

As covered in Part 1 of this article, the growth and evolution of the telemedicine industry has changed the healthcare landscape.  It is essential to keep up with the changes to ensure your telemedicine arrangements are commercially reasonable and provide compensation that is consistent with fair market value (FMV).  In Part 2 of this article, we continue to highlight our observations of the pitfalls to avoid when structuring telemedicine arrangements.

DON’T NEGLECT ADJUSTMENT OF OPERATING COSTS

When entering into an arrangement with a telemedicine services provider, one of the unique aspects of negotiation, which may not have been a point of contention in a standard on-call arrangement, is the determination of the party responsible for operating costs (e.g., technological infrastructure, software licenses, information technology, and clinical support staff).  From an FMV and commercial reasonableness perspective, the considerations necessary for determining FMV compensation for telemedicine coverage arrangements do not end with the professional services component of the coverage.  One of the most common pitfalls in structuring telemedicine arrangements is failing to consider FMV operating expenses.  Improper assessment of operating costs can result in under- or over-compensation/reimbursement.

UNDERVALUED OPERATING COSTS

HealthCare Appraisers has observed that the absence of any valuation of operating expenses has undermined telemedicine coverage negotiations.  Inexperienced valuators commonly exclude the costs associated with telemedicine that may not be observed in a traditional call coverage arrangement.  These costs range widely depending on the service line, but can include initial hardware purchases, implementation efforts, recurring information technology costs, and ongoing maintenance expenses.  While these costs may vary, understanding the correct financial commitment incurred by a provider to set up and maintain a telemedicine program may be the difference between a financially sustainable negotiation or potential cost landmine.

OVERVALUED OPERATING COSTS

Conversely, it is also common to overvalue the operating costs associated with telemedicine arrangements.  While doing so may not result in as many difficulties in negotiations, this error can result in dangerous situations from a compliance and risk standpoint.  Telemedicine arrangements are often costly upon commencement of the agreement due to equipment fees, program setup, and training.  If an arrangement includes such costs, it is important to consider whether the operating costs are specific to telemedicine coverage at a single facility or if they span across multiple locations.  A key driver in the expansion of telemedicine has been its ability to lower the cost of access to physicians.  This reduction is often achieved through economies of scale associated with expansion to new facilities with limited incremental cost.   

Operating expenses should not increase proportionally with the number of facilities covered. Although certain expenses are variable and increase linearly with each incremental facility, others either diminish marginally with each increase in coverage or are step-wise in nature.  For example, for each new facility covered, a new telemedicine cart will be needed to enable the services.  Conversely, once an initial base of information technology infrastructure has been established, the addition of a new facility results in a marginally lower increase in expenses.  Someone who is not familiar with the unique components of telemedicine implementation, such as the scope of operating expenses and the degree to which they increase with the scale of services offered, may risk wildly overstating the costs associated with implementing a telehealth program.

DON’T FORGET TO THINK OUTSIDE OF THE BOX

In an industry that is continuing to expand and mature, telemedicine providers utilize a constellation of unique compensation structures depending on the needs of their clients.  Accordingly, a growing trend in the marketplace is the divergence away from “traditional” compensation structures to secure physician coverage towards newer compensation structures that consider the nuances of telemedicine coverage. 

In our discussions with facilities looking to start a telemedicine program, we are sometimes posed with the question, “We pay a per diem rate for call coverage now; why would we do something else for our telemedicine arrangement?”   Sometimes the answer to this question is as simple as “you shouldn’t.”  However, it is often the case that a per diem rate might not be the best option for a particular arrangement, and negotiations may be near final before the parties have thought about all of the options available.  With variability in number of patients, specialties, and type of telemedicine service (e.g., emergency coverage, imaging, and scheduled consultations), there is not a “normal” payment model that is applicable to all telemedicine arrangements.  HealthCare Appraisers has compiled a list of the most common structures we see in telemedicine arrangements in the article, ”Telemedicine Industry Trends: Compensation Structure”. 

The payment mechanism embedded in a telemedicine arrangement can impact the FMV range of compensation, and in some instances, the overall commercial reasonableness of the arrangement.  For example, it does not make “business sense” for a small, critical access hospital to pay hefty per diems for coverage if it only expects to utilize the telemedicine services a dozen or so times per year.  With upfront fees, implementation costs, and other one-time payments, it can be difficult to navigate the landscape of payment terms inherent to these arrangements.  Therefore, understanding the payment options under a telemedicine arrangement and their value implications is essential.  Through our review of hundreds of telemedicine arrangements, we have observed that a lack of specialization and experience in telemedicine can often lead to fundamental misunderstanding of the value of such arrangements.  Additionally, outside-the-box thinking is often necessary.  A lack of experience and associated flexibility may leave you with a limited toolkit when seeking an arrangement best suited for your needs.

In conclusion, there are many ways that telemedicine arrangements can stray from FMV and commercial reasonableness.  We are hopeful that this review will help to ensure that the “don’ts” are not part of your next telemedicine arrangement.

Author: Kevin Cassell

The proliferation of telemedicine has opened a new frontier in contracting for physician services.  With its increasing feasibility as a patient care option, a wide variety of healthcare providers have turned to telemedicine programs to secure affordable coverage in the face of physician shortages and rising costs.  As the number of telemedicine arrangements in the market has continued to climb sharply, so has the need for obtaining reliable opinions of fair market value (FMV) and commercial reasonableness to ensure compliance.

As the industry has evolved in new ways, operators cannot succumb to the temptation of using old compensation models when designing telemedicine arrangements.  Although traditional compensation models may be applicable in certain cases, telemedicine arrangements require deep familiarity with the technology, workflow, and service offerings of this growing industry to ensure that providers are compensated appropriately.

Based upon our experience with telemedicine, HealthCare Appraisers has identified common pitfalls to avoid when structuring these arrangements.

DON’T ASSUME THAT TELEMEDICINE COVERAGE IS THE SAME AS CALL COVERAGE

While call coverage arrangements and telemedicine arrangements have some characteristics in common, such as requiring prompt physician consultation, there are several distinctions that could have implications upon FMV compensation and commercial reasonableness, such as:

Response time requirement and scheduling: Traditional on-call arrangements often entail a response time requirement associated with a physician’s telephonic response or presence at the hospital. Depending on the service line, telemedicine service arrangements may require faster or slower response times.  For example, a stroke telemedicine program may designate multiple providers to cover numerous facilities concurrently, so that they can respond immediately when contacted, given the need for rapid intervention for patients exhibiting stroke symptoms.  Conversely, an inpatient psychiatric telemedicine program dedicated to rounding on patients who are already admitted may only require providers to respond during normal business hours on the following day.

”Burden” of availability: In a traditional hospital on-call arrangement, physicians often respond to call events from their home or office if they are not in the hospital.  This coverage is usually provided in addition to the full-time coverage a physician provides for their private practice patients.  Due to geographic limitations, such physicians are limited in the number of facilities that can be covered at any given time.  In contrast, physicians staffing telemedicine programs often provide concurrent coverage to a large number of facilities, with the expectation that such coverage (including overnight periods) serves as their “full-time” work for the day.  Therefore, instead of being required to wake up in the middle of the night under a traditional call model, the individual physician’s schedule under a telemedicine arrangement may be less burdensome.  This is because the telemedicine physician’s regular schedule would include coverage of nighttime hours.
Total cost and coverage alternative: From a compliance and financial perspective, understanding the cost differences between different coverage options is a key factor in structuring telemedicine arrangements. Individuals preparing these arrangements must understand the financial benefits or hindrances associated with telemedicine coverage relative to other coverage options, such as call coverage or employment arrangements.

DON’T ASSUME THAT ONE SIZE FITS ALL

The regulatory environment surrounding telemedicine arrangements varies widely from state to state.  Medicaid programs may reimburse for no, some, or all telehealth services, depending on multiple factors (e.g., specialty, type of service, delivery of service).  Furthermore, many states have enacted “parity” laws that dictate when private insurers must reimburse for telehealth services, and in some cases, the rates at which the reimbursement must be paid.  However, such “parity” may only apply to certain telehealth services, or to patients that are located in rural communities.  The table below highlights the significant inter-state variability in reimbursement for telehealth services, as summarized by the American Telemedicine Association.[1]

Additionally, regulations require that physicians maintain active licensure in the state(s) in which their patients are located, even if the care is provided through telemedicine.  Certain states, like Maryland, offer licensing reciprocity with bordering states, so that physicians licensed in those states can provide telemedical care of patients located in the state allowing the reciprocity.[2]  

The presence or absence of reciprocity may affect FMV compensation for a telemedicine provider.  For example, if a state that does not offer reciprocity has a shortage of physicians in the subject specialty, higher compensation benchmarks may be appropriate in valuing the professional component of the telemedicine services.

Continue to Part Two

Author: Luis Argueso

The primary barrier to adoption of telemedicine as a universal tool for providing medicine has been the lack of reimbursement for telemedicine services.[1] On July 21, 2018, the Centers for Medicare & Medicaid Services (CMS) took a major step towards facilitating reimbursement for telemedicine in its proposed rule for the calendar year 2019 Medicare Physician Fee Schedule (MPFS).[2] Should CMS adopt the revisions contained in the proposed rule, healthcare providers will experience a sea change in their ability to receive payment for telemedicine services.

SUMMARY OF PROPOSED CHANGES

Historically, Medicare has imposed a number of preconditions for reimbursement for telemedicine services. Chief among them is the requirement that the beneficiary of the service receive care in an “originating site” located in a rural or healthcare provider shortage area. The 2019 MPFS proposed rule defines three new groups of Current Procedural Terminology (CPT) codes that any qualified provider can bill Medicare for reimbursement. These codes are summarized in the table below, along with the proposed work relative value unit (wRVU) amounts:

The three groups described above are just one component of the ways in which CMS is changing telemedicine reimbursement; additional proposed reimbursement changes include:

• Additions/revisions to Medicare telemedicine codes currently reimbursable, but subject to preconditions in Section 1834(m) of the Social Security Act; and
• Creation of separate payments for medication assisted treatment for substance use disorders.

While there are still many developing changes in the telemedicine world, CMS is taking steps that will lead to additional reimbursement for telemedicine in recognition of the ability of this form of medical care to achieve the triple aims of improving outcomes, increasing patient satisfaction, and reducing costs.

COMPLIANCE GOING FORWARD

While changes in government (and commercial) payor policies regarding telemedicine reimbursement may lead to substantial growth in the industry, there are important considerations providers must take into account to ensure compliance. As telemedicine service arrangements often involve payments between designated health service providers and professional medical practitioners, the Stark Law and Anti-Kickback Statutes are often implicated. Below are a few of the key items to consider should the CMS 2019 MPFS proposed rules become adopted:

1. Increased reimbursement implies decreased financial support: If a telemedicine provider is billing and collecting for telemedicine services, the entity providing financial support for their services must account for the significant impact to revenue from improved reimbursement. This may result in a revision to fair market value compensation.
2. Reevaluating commercial reasonableness: Historically, it has been common for facilities and telemedicine providers to forego billing and collecting for professional services. With the opportunity for reimbursement from Medicare, it may no longer be commercially reasonable for the parties to forego collecting for professional telemedicine services.
3. Keeping on top of changes: As acknowledged in the proposed rule to the 2019 MPFS, telemedicine services are distinct from other forms of healthcare services (e.g., face-to-face in-person care). When evaluating fair market value compensation for and commercial reasonableness of telemedicine services arrangements, ensure the valuation considers the latest industry developments and unique considerations associated with these arrangements. HealthCare Appraisers recently cohosted a webinar to review these very items.

CONCLUSION

As leaders in the healthcare valuation industry, HealthCare Appraisers continues to review and adapt our valuation process as quickly as the market evolves. As scrutiny of telemedicine payments by regulators is expected to continue to grow, our experience in the telemedicine industry provides us with the background necessary to ensure your arrangement satisfies commercial reasonableness and FMV requirements.

Author: Luis Argueso 

Telemedicine as a modality of medical care continues to expand and gain traction in the United States. On February 9, 2018, President Trump signed into law the Bipartisan Budget Act of 2018 passed by Congress. This budget incorporated the text of the Creating High-Quality Results and Outcomes Necessary to Improve Chronic (CHRONIC) Care Act. The CHRONIC Care Act facilitates Medicare reimbursement for telemedicine services, for example, by relaxing the “originating site” (i.e., the location at which the Medicare beneficiary is receiving medical care) restrictions for patients receiving telehealth services.These recent developments further the financial viability of telemedicine as a tool to treat patients. As providers look to enter into arrangements to secure telemedicine coverage, the parties must be aware of compensation terms that may implicate the Stark Law, Anti-Kickback Statute, and the Internal Revenue Code. In such instances, the compensation terms must be commercially reasonable and consistent with fair market value.

As a relatively new and growing industry, establishing the commercial reasonableness of, and fair market value compensation for, telemedicine services may pose a challenge. HAI has observed firsthand the evolution of the telehealth industry and gradual development of norms. One aspect of telemedicine arrangements between health systems/facilities and telemedicine providers that has started to solidify is the compensation structure used in the agreements. Below, we summarize a taxonomy of the most common payment mechanisms we have observed in telemedicine arrangements.

 Taxonomy of Telemedicine Payment Mechanisms 

As illustrated by the variety of payment mechanisms above, there is no “one-size-fits-all” solution to the compensation structure for telemedicine services. As a result, opinions of commercial reasonableness and fair market value compensation must be tailored to the unique terms of each arrangement.

HealthCare Appraisers keeps abreast of the latest innovations of healthcare delivery to maintain our position as the market leader in healthcare valuation. HealthCare Appraisers’ experience and relationships with key participants in the telemedicine industry position us to provide unique insight to ensure your telemedicine arrangements satisfy commercial reasonableness and FMV requirements.