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(The RAND Blog)

September 3, 2015

Paying for Telemedicine

Photo by Syda Productions/Fotolia

by Shira H. Fischer

In April, Congress passed the “doc fix” bill with strong bipartisan support (92 to 8 in the Senate; 392-37 in the House), avoiding a scheduled 21.2 percent cut in payments to physicians who treat Medicare patients and fundamentally reforming how Medicare pays providers for in-person care. While passage of this legislation represents a major shift in physician payment policy, the doc fix didn't address how to pay for a relatively new method of delivering care: telehealth.

Telehealth, also often called telemedicine or virtual care, involves delivering health services and information via technology like voice and video. It can include telephone calls, videoconferencing, and remote monitoring (patient measures blood pressure or glucose at home and physician monitors changes remotely), and can be conducted in real time, such as in a live video, or asynchronously, for example when a photograph or radiograph is taken, and an expert, at a different location, later reads and interprets it.

RAND experts have reviewed past research, which increasingly points to telehealth's potential for better care, lower costs, and increased convenience. Telehealth could increase access for people in underserved areas, save time for patients, and when used for remote monitoring, help avoid some visits totally. But there is little incentive right now from the provider side. Some providers say that without a mechanism to bill for work done outside of an in-person visit, there is no incentive to spend time on the phone or on email communicating with patients, even as these interactions can prevent unnecessary visits and save the system money. And within the current Medicare system, there are also many limitations on which patients can use the telehealth services that are reimbursed.

However, despite the push for increased telehealth “parity” (reimbursing telehealth services in an equivalent fashion to an in-person appointment), we know that suddenly reimbursing all telehealth exactly like in-person visits is dangerous. If health policy researchers have learned one thing from examining different health insurance models, it's that there are unintended consequences with almost any new payment incentive. A simple fee-for-service model would likely lead to increased use of telehealth, but it could also lead to overuse, and the care received might well be lower value. As Ateev Mehrotra of RAND told a House Energy and Commerce subcommittee last year: “The very advantage of telehealth, its ability to make care convenient, is also potentially its Achilles' heel. Telehealth may be 'too convenient.'”

The risks and benefits should be examined to determine in what cases telehealth is a good, safe, and cost-effective option. But to do so, systems are needed to allow testing and evaluation of the impact and quality of care beyond the in-person visit model. Emerging payment models, such as accountable care organizations, may hold the greatest potential for effective and efficient use of telehealth services, as RAND researchers have recommended in the past. These bundled payment schemes reward efficient use of resources, motivating selection of the best mode of communication for a given situation, whether in person or virtual.

Early efforts should target the populations and the specialties that hold the best promise. Disadvantaged populations that have the most limited access to care, or those with chronic disease requiring frequent interactions, could be a testing ground for reimbursement schemes without risking expensive overuse or decreased care quality. Similarly, some medical specialties may be better suited to telehealth than others. For example, using “telemental health” to deliver psychiatric care is very promising as most interactions can be completed purely through conversation, either for therapy or for medication management. The Veterans Health Administration (VA) reported in 2012 that more than 10 percent of its clinical video appointments were for mental health and this care has proven to be high-quality and effective.

Some organizations are ahead of the general trend. The VA was an early adopter of electronic records and now is a leader in telehealth. With more than 45 percent of VA patients living in rural counties, VA is focusing on expanding the reach of its program to rural veterans, including through programs which reach patients in their homes. Kaiser Permanente has also been a leader in telehealth research. These provider organizations have been able to test telehealth partly because of their alternative payment structures.

In July, the House of Representatives passed the bipartisan 21st Century Cures Act (H.R.6). While the bill did not expand federal payments for telehealth, H.R. 6 would add a new requirement to collect data on current telehealth reimbursement. However, interest among legislators, advocates, and health care experts in promoting telehealth remains and there may be opportunities to address federal payment policies for telehealth services in future legislative efforts.

Telehealth holds great promise, but more information is needed to determine what works and what doesn't. For that to happen, research should move forward while incentives are selectively provided for using these new tools.


Shira Fischer is an associate physician researcher at the nonprofit, nonpartisan RAND Corporation.