The Outlook for Telemedicine
An Examination of the Commercial, Medicare and Medicaid Markets
Every year, new telemedicine programs emerge around the country. They have helped consumers avoid long drives and missed work, shortened wait times, made service delivery more convenient, and even facilitated the sharing of certain types of information that would be impossible to convey in a traditional office setting. Yet a nationwide embrace of this medium on the same level as other popular online platforms like ridesharing or online shopping has proven elusive. Polls suggest that the desire is there, but true market penetration has seemed to be perpetually just around the corner.
Regulatory and strategic factors have affected the growth of telemedicine in different ways in the commercial, Medicare and Medicaid markets, and changes materializing in each of these sectors will require industry players of all types to re-examine their approach to this service medium. Here is an overview of this changing landscape which industry players of all stripes should be aware of.
Commercial
In the past few years, we have seen the commercial sector, through which most Americans are covered, make investments in telemedicine at an unprecedented pace. Large-group insurance plans have been rapidly adding it to their coverage options: in 2015, 27% of the most frequently selected insurance plans offered by large employers include telemedicine. In 2018, that number had grown to 74%.[1]
Utilization of telemedicine by commercial consumers is also growing quickly. A white paper by the nonprofit FAIR Health found that claims for telemedicine services in their dataset have grown by an incredible 1,202% between 2012 and 2017, far more than claims in urgent care centers or retail clinics.[2] The Truven MarketScan database saw a similar elevenfold increase in utilization during the span between 2011 and 2016 (the latest data available). However, utilization is still extremely low: fewer than 0.5% of large-group beneficiaries actually used telemedicine in 2016.[3]
The diffusion of innovation curve is sometimes used to explain the rate at which a product gains popularity. There are two factors which indicate that telemedicine is at an early stage within this framework. According to the Truven dataset, uptake of utilization is currently accelerating, as it does in the model’s early phases. Second, polls indicate that interest in telemedicine far exceeds current utilization: a survey conducted by Welch et al.[4] found that while only 3.5% of respondents had ever had an online video visit with their healthcare provider, 52% would be willing to do so and only 25% would be unwilling to do so. There seems to be much room to grow, once the medium has been more widely tested and proven.
Click to expand.
However, this medium will never have a chance to become widely adopted among consumers unless providers adopt it too. Simply because someone’s health plan covers telemedicine does not mean they can access those services; their providers need to be willing and able to deliver them. And although many hospitals currently offer telemedicine programs, they are often narrow in focus and ancillary to their main service delivery mediums.
Take, for example, behavioral health. This is the field in which telemedicine has the greatest potential to make a difference, and currently most (53%) of telemedicine visits are of this type.[5] Ample peer-reviewed evidence supports the notion that a live video medium is an equally effective to a number of office-based psychiatry treatments.[6] However, most psychiatrists have never conducted a televisit before and in most states, fewer than 10% of psychiatrists have ever conducted one.[7]
The results of an American Medical Association survey suggest that the cost of system implementation poses a barrier, and that smaller practices are less likely to adopt the technology.[8] Also important to note is there has not been strong impetus for change for successful providers—if it ain’t broke, don’t fix it.
However, provider hesitancy towards telemedicine may yield as economic forces continue to push them towards it. 39 states have parity laws in place or proposed, requiring private insurers to cover telemedicine services at the same rate as in-person services.[9] Many providers struggle with no-show rates causing valuable hospital resources to sit idle; telemedicine may prove a viable solution to increase show rates by negating the burden of travel, as well as allow providers to schedule appointments immediately when they have a no-show. And as commercial sector consumers, who often have standard nine-to-five work hours and inflexible schedules, increasingly desire fast, flexible and convenient interactions with the healthcare system, traditional providers will need to offer services like telemedicine in order to compete with retail and urgent care.
Medicare
The Center for Medicare and Medicaid Services (CMS) wields enormous market power, not only because it covers 60 million Americans directly through Medicare and another 72 million indirectly through Medicaid, but also because it consciously leverages its size to influence the entire industry. The CMS Innovation Center is the embodiment of just that—testing payment and service delivery models and setting standards and best practices throughout the health system. If anything contradicts the stereotype that private industry is the sole source of innovation in America while government regulation holds it back, it is CMS.
This is why many have been surprised by the slow pace at which Medicare has embraced telemedicine. CMS restricts reimbursement for telemedicine services to rural or professional shortage areas, doesn’t reimburse if the “originating site” (the patient’s location during the encounter) is not a healthcare facility, and limits telemedicine reimbursement to a small number of services.[10] The main reasons why Medicare has been hesitant to pay for these services is because they require a high standard of evidence and because, to date, Congressional Budget Office scorings of telemedicine expansion proposals have suggested that they would increase the program’s outlays.[11]
However, lawmakers and regulators seem to be gradually changing their stance, and 2019 witnessed the enaction of the most significant expansions of telemedicine coverage in Medicare to date. Here are some of the changes that have been or are currently being made:
On January 1, 2019, the Bipartisan Budget Act of 2018 removed originating site geographic conditions and added eligible originating sites to diagnose, evaluate, or treat stroke
On July 1st, the Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment (SUPPORT) for Patients and Communities Act removed geographic restrictions for substance use disorder treatment[12]
Medicare’s Calendar Year 2019 Physician Fee Schedule expanded telemedicine reimbursement and provided a looser interpretation of location, service and medium-based restrictions for virtual check-ins, interprofessional consultations and “store and forward” technology which enables a patient to save files like images and photos and send them to their provider[13]
More Medicare ACOs can now use the Next Generation ACO telemedicine waiver which eliminates the geography restriction, allows telemedicine in the patient home and reimburses for teledermatology and teleophthamology services
Beginning in 2020, Medicare Advantage plans (which cover approximately a third of Medicare beneficiaries) will be allowed to provide telemedicine services that expand beyond what is offered in traditional Medicare
Loosening restrictions are not the only sign that telemedicine has a big future role in Medicare. Among 65-and-older consumers, telemedicine appears to be in demand, and that demand only increases as increasingly tech-savvy retirees join the ranks of the program. A survey conducted by American Well, a telemedicine company, suggested that most seniors would be willing to use telemedicine, although only 1% have ever actually used it.[14] The same survey found that seniors see a strong potential for using telemedicine for prescription renewals and managing chronic illness, both of which are common needs among seniors.[15]
Medicaid
Because each state runs its own Medicaid program, each has flexibility regarding whether to cover or not cover telemedicine, what types of telemedicine to cover, where in the state it is covered, how it is provided, what types of practitioners and services are covered or reimbursed and what types of licensure is required. As a result, states differ markedly in their restrictiveness for telemedicine.
Medicaid Managed Care Organizations, which cover approximately two-thirds of Medicaid enrollees, often view telemedicine as an important strategy to maintain compliance with network adequacy requirements. This is especially true in states which expanded their Medicaid program under the Affordable Care Act, in which more than seven in ten MCOs had to expand their networks to accommodate the increase in enrollment. According to a Kaiser Family Foundation survey, 68% of MCOs offer telemedicine services, mostly for mental health and substance use services.[16]
Another trend in Medicaid is that more and more programs are implementing Accountable Care Organizations (ACOs). In 2018, 14 states had such programs in place, double the number from 2015. Telemedicine can strengthen population health management efforts and potentially reduce total cost of care, if the reduction in utilization of acute services indeed exceeds the cost of the administered telemedicine services, as ACOs hope it will. Some studies have found that most televisits represent new utilization rather than substituting for face-to-face visits,[17] however there is also evidence that telemedicine services can redirect care from higher cost settings like Emergency Departments.[18]
At Day Health Strategies, we worked with a provider network in Massachusetts to implement a telepsychiatry program for a Medicaid population. Massachusetts would seem like the last state that needs telepsychiatry—it’s geographically small, is home to a very high concentration of healthcare providers, and nearly all of the geographic area of the state is designated as a metropolitan area, ineligible for Medicare reimbursement for telemedicine.
However, we soon found that there is indeed a gaping need for these services, even in a small, relatively urban state. For example, patients living on Cape Cod in Massachusetts (an area ineligible for telemedicine reimbursement from Medicare) face significant transportation barriers for appointments, and nearly 300,000 state residents throughout the state live in mental health care professional shortage areas.[19] Wait times for psychiatry visits often extended into multiple months. And patients requiring stabilization, bridging of medications to prevent readmissions, and patients who left a hospital without a prescription are all use cases requiring immediate attention, which this particular telepsychiatry program was meant to address. In addition to access issues, psychiatrists told us that they could gather key information about a patient communicating from their home, such as the condition of their living space and their baseline temperament, which is difficult to gauge after someone has driven into a city for an appointment.
The Medicaid population tends to have more issues with accessing care than the commercial or Medicare populations. Transportation is a significant issue as many patients rely on public transit and it is difficult to take time away from work, child care and other responsibilities. Communication can be challenging as some beneficiaries have changing living situations and contact information and thus do not receive appointment reminders or provide advance cancellation notice. And day-to-day emergencies frequently interrupt plans.
Administrators who work in provider settings where lots of Medicaid patients seek care are faced with a constant struggle to use their valuable resources to the fullest extent possible. Telemedicine may prove a valuable tool for achieving this end, both ensuring that Medicaid populations are able to receive quality, timely care and also helping the fiscal viability of critical safety net providers.
Is it Time for Providers to make the Leap?
According to an American Hospital Association (AHA) survey, 76% of hospitals featured or were implementing a telemedicine system in 2017, up from 43% just five years prior.[20] Much of this growth is funded by grants. Telemedicine companies continuously improve safety, privacy and user experience and can accommodate a variety of models as needed by their clients. Although telemedicine is not appropriate for every type of healthcare service, the evidence base continues to grow. And politicians are finding that telemedicine can be an effective tool to address public health crises, as was done in the SUPPORT Act.
Healthcare providers should not be dissuaded by the low levels of consumer uptake. Current trends in the healthcare system point to it becoming more widespread each year as Medicare peels away restrictions, providers are increasingly incentivized to find creative ways to provide cost-effective services, and consumers get used to the idea of receiving healthcare through different mediums. Applying for grants and implementing new programs may seem daunting, but in our experience this added service can greatly enhance patient satisfaction, improve access to care and provide a head start towards the future of an evolving healthcare system.
[1] Ray, Matthew and Cynthia Cox. “More employers are paying for telemedicine, but enrollee take-up has been relatively low.” Peterson-Kaiser Health System Tracker, October 3, 2018. https://www.healthsystemtracker.org/brief/more-employers-are-paying-for-telemedicine-but-enrollee-take-up-has-been-relatively-low/#
[2] “FH Healthcare Indicators® and FH Medical Price Index® 2019.” FAIRHealth, April, 2019. https://s3.amazonaws.com/media2.fairhealth.org/whitepaper/asset/FH%20Healthcare%20Indicators%20and%20FH%20Medical%20Price%20Index%202019%20-%20A%20FAIR%20Health%20White%20Paper.pdf
[3] Ray, “Employers.”
[4] Welch, B. M., Harvey, J., O’Connell, N. S., & McElligott, J. T. (2017). Patient preferences for direct-to-consumer telemedicine services: a nationwide survey. BMC health services research, 17(1), 784.
[5] Barnett, M. L., Ray, K. N., Souza, J., & Mehrotra, A. (2018). Trends in telemedicine use in a large commercially insured population, 2005-2017. Jama, 320(20), 2147-2149.
[6] Hubley, S., Lynch, S. B., Schneck, C., Thomas, M., & Shore, J. (2016). Review of key telepsychiatry outcomes. World journal of psychiatry, 6(2), 269.
[7] Johnson, Stephen Ross. “Low adoption of telemedicine may spur patient migration away from traditional providers.” Modern Healthcare, March 23, 2019. https://www.modernhealthcare.com/technology/low-adoption-telemedicine-may-spur-patient-migration-away-traditional-providers
[8] Kane, C. K., & Gillis, K. (2018). The use of telemedicine by physicians: Still the exception rather than the rule. Health Affairs, 37(12), 1923-1930. https://www.healthaffairs.org/doi/pdf/10.1377/hlthaff.2018.05077
[9] http://legacy.americantelemed.org/policy-page/state-policy-resource-center
[10] “Medicare Telehealth Payment Eligibility Analyzer.” Health Resources and Services Administration. https://data.hrsa.gov/tools/medicare/telehealth
[11] https://www.claconnect.com/resources/articles/2018/the-future-of-telehealth-providers-should-be-watching-the-trends
[12] Boese, Jennifer. “The Future of Telehealth: Providers Should Be Watching the Trends.” CLAConnect, February 15, 2019. https://www.cms.gov/outreach-and-education/medicare-learning-network-mln/mlnproducts/downloads/telehealthsrvcsfctsht.pdf
[13] “Big changes in 2019 for Medicare telehealth policy.” Center for Connected Health Policy, November 6, 2018. https://mailchi.mp/cchpca/big-changes-in-2019-for-medicare-telehealth-policy
[14] “Telehealth Index: 2019 Senior Consumer Survey.” American Well. https://www.americanwell.com/resources/telehealth-index-2019-senior-consumer-survey/
[15] Ibid.
[16] Garfield, Rachel, Elizabeth Hinton, Elizabeth Cornachione, and Cornelia Hall. “Medicaid Managed Care Plans and Access to Care: Results from the Kaiser Family Foundation 2017 Survey of Medicaid Managed Care Plans.” Kaiser Family Foundation, March 5, 2018. https://www.kff.org/report-section/medicaid-managed-care-plans-and-access-to-care-provider-networks-and-access-to-care/
[17] Philip, Susan. “Telehealth under alternative payment models.” Milliman, September 13, 2017. http://us.milliman.com/insight/2015/Telehealth-under-alternative-payment-models/
[18] Shayan Vyas, Joanne Murren-Boezem, and Patricia Solo-Josephson. “Analysis of a Pediatric Telemedicine Program.” Telemedicine and e-Health. Dec 2018. ahead of print http://doi.org/10.1089/tmj.2017.0281
[19] “Mental Health Care Health Professional Shortage Areas (HPSAs).” Kaiser Family Foundation. https://www.kff.org/other/state-indicator/mental-health-care-health-professional-shortage-areas-hpsas/?currentTimeframe=0&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D
[20] “Fact Sheet: Telehealth.” American Hospital Association. https://www.aha.org/system/files/2019-02/fact-sheet-telehealth-2-4-19.pdf