Medical Directors Forum

Telemedicine Seems To Work But Payment Creates a Disconnect

The cost savings go to payers, but providers often wind up footing the bill. Value-based care could solve the problem.

Richard G. Stefanacci, DO, MGH, MBA, AGSF, CMD
Medical Directors Forum Steering Committee

With telemedicine services growing each and every day, the effective use of these options requires the answering of at least four questions:

  • Which patients will benefit?
  • When and where should this service be utilized?
  • What service is optimum?
  • Who should pay for the services?

This last question is the primary driver because organizations are typically reluctant to invest upfront for anticipated savings as opposed to spending on something sure to increase their revenue, such as radiology equipment or new doctors. Unfortunately, most telemedicine opportunities are on the cost savings, not the revenue-producing, side of the ledger.

There are some limited examples where telemedicine is paid for directly and thereby provides a source of revenue. One example is Medicare’s payment for a limited number of Part B clinical consultative services furnished by a physician or practitioner to an eligible beneficiary via a telecommunications system. Currently, for Medicare eligible telehealth services, the use of a telecommunications system substituting for an in-person encounter must occur in parts of the country that CMS classifies as rural Health Professional Shortage Areas.

Richard G. Stefanacci

Who pays?

In addition to the heavy restriction on revenue support for telemedicine, exactly how the cost savings are experienced is a problem. Currently, the payer (commercial, Medicare, Medicaid) responsible for the total cost of care usually gets the economic benefit of telemedicine. But is it the hospital system or skilled nursing facility (SNF) that pays for the service?

Take, for example, use of virtual after-hours SNF services offered by some primary care providers. While the savings are attributed to either the Medicare fee-for-service program or a Medicare Advantage plan, neither is typically willing to pay directly for telemedicine services.

Instead others, such as SNFs, are leading the telemedicine investment for primary care provider after-hours coverage. Further complicating the support of this activity is the fact that SNFs’ support of telemedicine in primary care may actually end up decreasing their Medicare Part A revenues because telemedicine may reduce avoidable admissions. So why do it? The goal is to improve patient care. But there’s the potential for increased volume by virtue of being a preferred SNF in the narrowing post-acute health care network.

As American health care shifts from fee-for-service, disconnected health care to value-based, holistic care, an alignment between providers and total cost of care should encourage the use of telemedicine—especially in cases where it has been shown to reduce costs and improve individual care and population health. If value-based care can begin to iron out the problems about how telemedicine is paid for, we can then begin to focus on the important questions of where, when, and what telemedicine services are needed to improve health care outcomes.

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