Dena S. Puskin, Sc.D.
The author gratefully acknowledges the efforts of Amy Barkin, Carolyn Hutcherson, Joanne Kumekawa, Karen Sleezer, Rob Sprang, Cathy Wasem, and Bob Waters in preparing various background documents used in this chapter.
Until the late 1990s, e private and public third-party payers generally did not have explicit policies to pay for telehealth services. The Balanced Budget Act of 1997 signaled a significant change in Medicare payment policies opening the door for telemedicine reimbursement. This article traces the development of current Medicare telemedicine payment policies, beginning with the BBA of 1997 and including current medicare payment legislation. Issues related to telemedicine payment by both Medicare and other third party payers are presented; implication for the future, and the role of the nursing community are discussed.
Citation: Puskin, Dena S. (September 30, 2001). "Telemedicine: Follow the Money". Online Journal of Issues in Nursing. Vol. 6 No. 3, Manuscript 1. Available: www.nursingworld.org/MainMenuCategories/ANAMarketplace/ANAPeriodicals/OJIN/TableofContents/Volume62001/No3Sept01/Telemedicine.aspx
Key words:telehome care, telehealth, telemedicine, reimbursement, Balanced Budget Act, home health
"Follow the money." How many times have we heard this phrase? In health policy as in life, it is often true that money, or the lack thereof, drives many decisions. Over the past 60 years, both private and government third-party payment policies have done much to shape our health care system. No more clearly can this be seen than in the changes in Medicare hospital inpatient payment policies during the mid-1980s, setting a precedent for most payers to move from cost-based to prospective payment systems and resulting in hundreds of hospitals closing or merging.
Until the late 1990s, private and public third party payers generally did not have explicit policies to pay for telehealth or telemedicine services, with some exceptions. For example, Medicare reimbursed for some services that did not traditionally require face-to-face contact between a patient and practitioner, such as radiology or EKG/ EEG interpretation. Moreover, reimbursement was idiosyncratic for these services, depending on the policies of individual Medicare carriers. As a result, telemedicine services had not found a firm financial footing, being largely sustained through grants and special contracts.
The Balanced Budget Act of 1997 (BBA) signaled a small, but significant, change in Medicare payment policies that began to open the door for telemedicine reimbursement, setting a precedent that is expected to ultimately affect most third-party payers. This article will trace the development of current Medicare telemedicine payment policies, beginning with the BBA, and discuss the implications of these policies for future directions in third party funding of telemedicine.
Medicare Payment: 1997-1999
Although the BBA was enacted in 1997, Congress did not require the telemedicine provisions to be implemented until January 1, 1999. Unfortunately, these provisions and the Health Care Financing Administration’s (HCFA’s) interpretation of them provided very limited help for most telemedicine service providers. On September 30, 2000, almost two years after implementation of the law, Medicare through the U.S. Department of Health and Human Services had reimbursed a total of $20,000 for 301 teleconsultation claims (Department of Health and Human Services [DHHS], 2001).
Despite the very limited impact of this program, it was an important first step. Prior to passage of the BBA, the debate centered around whether Medicare should pay for telemedicine services. After its passage, the debate shifted to how Medicare should pay for telemedicine services. It became very important to understand why the program was not working and how to fix it. Clearly understanding these limitations today can be very instructive in understanding what needs to be considered in crafting future payment programs.
In large part, the program did not work because it was predicated on a very limited view of how telemedicine is actually practiced. These limitations fell into four categories: who can receive services; (b) what is covered; (c) who gets paid; and (d) how are services reimbursed.
Who Can Receive Services -- The Health Professional Shortage Area Conundrum
Under the BBA, only services provided to patients in federally-designated rural Health Professional Shortage Areas (HPSAs) were eligible for reimbursement. Areas designated as rural HPSAs, generally lack sufficient primary care providers. Yet, there are many rural communities that have sufficient primary care resources but lack vital specialty services. For example, a community may have a nurse or general practitioner, but not cardiologists, psychologists or psychiatrists, or dermatologists. These communities could and do greatly benefit from telemedicine, but telemedicine providers who served them could not be reimbursed under the BBA provisions.
The restriction of coverage to rural communities severely narrowed the applicability of this provision. While individuals living in rural communities often face severe barriers in accessing adequate specialty services, poverty, poor public transportation, and frailty can pose equally daunting barriers to many inner city urban residents.
What is Covered -- Eligible Current Procedural Terminology Codes (CPT Codes) and Technologies
- Services: The BBA referred to covering "interactive consults." Following terminology developed by the American Medical Association, a consultation is a type of service provided by a physician whose opinion or advice regarding evaluation and/or management of a specific problem is requested by another physician or other appropriate source. A physician consultant may initiate diagnostic and/or therapeutic services (American Medical Association, 2001). As interpreted by HCFA in the regulations, the term "consult" referred to a very limited set of CPT codes that could be reimbursed under the statute. More specifically, CPT codes 99241-99275 were covered. Consultations can be for new or established patients in outpatient/clinic or clinic settings. This greatly restricted the types of services that could be reimbursed, eliminating many of the services already provided by telemedicine practitioners. For example, routine office visits and medication management were not covered.
- Technologies/Store and Forward Technologies: The BBA’s reference to "interactive consults" limited reimbursement to those encounters where the patient is present, with a few exceptions. Medicare historically reimbursed some telemedicine services that did not require the patient present, such as EKG or EEG interpretation, teleradiology, or telepathology, in accordance with individual Medicare carrier policies, and would continue to do so under this legislation. While most teleconsults fell into the "interactive" category, a growing number of programs were beginning to find that they could substitute "store and forward" consults for an interactive encounter. Store and forward technologies involve the asynchronous transmission of medical information to be reviewed at a later time by a physician or practitioner at a distant site. Store and forward consults occur when a referring practitioner sends still images, x-rays, MRIs, EKGs, and EEGs, laboratory results, video or audio clips, and other material from a patient visit to a consulting practitioner for diagnosis and/or treatment recommendations. The consultant reviews the cases without the patient being present in real-time. A common example of a store and forward consult occurs in dermatology where a referring practitioner sends pictures of a lesion to the dermatologist for a diagnostic and therapeutic recommendation. Again, while these consults did not constitute a major portion of teleconsults, they represent a major area for growth in the field, and for some communities, such as remote arctic communities in Alaska, store and forward is the only affordable way to practice telemedicine. In these instances, store and forward consults represented a more cost-effective approach to practice.
In contrast to a store and forward consult, often a referring practitioner will send medical information to the consultant for review prior to an interactive consult in order to increase the efficiency of the interactive consult. This application does not constitute a store and forward consult because it does not substitute for an interactive encounter.
Who Gets Paid -- Eligible Practitioners
Under the BBA, practitioners were divided into either referring/presenting practitioners or else consulting practitioners. Only practitioners who were eligible to receive direct Medicare payments for consultations under prevailing policies for face-to-face care were eligible to receive consultant payment under the telemedicine benefit. Eligible referring practitioners included physicians, clinical nurse specialists, physician assistants, nurse practitioners, certified nurse midwives and clinical psychologists. These referring practitioners were generally required to be present at the consult if the consult was to be reimbursed.
These definitions reflected an unrealistic picture of actual telemedicine practice. In many consults, the referring practitioner is not present during the consultation. Also the patient is often "presented" by someone other than the referring practitioner. In actual telemedicine consults these presenters tend to be registered nurses, licensed practical nurses, or other health technicians, thereby rendering the consult ineligible for payment under the BBA.
Yet, to be paid under the BBA, presenters needed to be either an eligible referring practitioner or an eligible presenter who is an employee of the referring practitioner. In many cases, the presenter is an employee of a local hospital or clinic, not the referring practitioner.
How Are Services Reimbursed -- Fee Splitting
Under the BBA provisions, consultants and referring practitioners were to split the fees for a teleconsult: 75 percent to the consultant and 25 percent to the referring practitioner. This arrangement was problematic for both the consulting and the referring practitioners. While receiving only 75 percent of the payment, the Health Care Financing Administration (now the Centers for Medicare and Medicaid, as of 2001) would report 100 percent of the payment to the IRS. In a University of Missouri study of 21 telehealth networks, representing 4,424 encounters between July 1, 1999 and December 31, 1999, 100 percent reported that their accounting systems could not track the split fees. Moreover, 90 percent reported that the consultants participating in their programs would not accept 75 percent of their normal fee for a consult (Tracy, McClosky-Armstrong, Sprang, & Burgess, 1999).
Current Medicare Payment Legislation
At the end of December, 2000, Congress passed the Medicare, Medicaid, and SCHIP (State Childrens’ Health Insurance Program) Benefits Improvement Act of 2000 (BIPA), which became effective October 1, 2001. Section 223 of the Act greatly expanded Medicare coverage for telemedicine to better reflect current practice. More specifically, it:
Expands Who Can Receive Services
The Act defines a telehealth visit as one occurring between an originating site, that is the site where the patient is located at the time the service is provided by a telecommunications system, and a distant site, the site where the practitioner providing the professional service is located at the time the service is provided via a telecommunications system. The Act greatly expands the definition of originating site beyond rural health professional shortage areas to include all non-metropolitan statistical areas and any entity that participated in a Federal telemedicine demonstration project that was approved by (or received funding from) the Secretary of Health and Human Services as of December 31, 2000.
The Act does not, however, expand coverage to all health care sites in rural communities. In fact, the Act does specifically define eligible originating sites. These sites include:
- The office of a physician or practitioner
- A Critical Access Hospital
- A Rural Health Clinic
- A Federally Qualified Health Center
- A hospital
Expands What Services are Covered
The telehealth services covered are expanded beyond professional consultations to include consultations (CPT codes 99241-99275), office or other outpatient visits (CPT codes 99201-99215), individual psychotherapy (CPT codes 90804-90809), medication management (CPT code 90862), and any additional services specified by the Secretary of Health and Human Services. The Secretary of health and Human Services establishes a process for annually examining and updating the services to be covered.
Clarifies Home Health Coverage
The Act clarifies that home health agencies may use prospective payment dollars to pay for telemedicine in the home. Under Medicare’s prospective payment system, agencies are paid a fixed amount per episode of home health services. Patients are classified as low or high use patients, wherein the agency is compensated a lower amount for low use patients (those requiring four or fewer visits). A telehomecare visit cannot substitute for an in-person visit, and it will not count as a visit for the purposes of triggering a higher payment level. Nor will these telehome care visits be specifically reimbursed under the home health benefit. At the same time, if these technologies are to be deployed in the care of a home care patient, the home care plan, certified by the physician, must specify the expected level of in-person home care visits and separately identify the use of telehome care when appropriate.
Eliminates the Presenter Requirement
The Act eliminates all requirements for a patient to be "presented" by a physician or practitioner at the originating site, unless medically necessary. The decision of medical necessity is to be made by the practitioner at the distant site.
Eliminates Fee Splitting -- Payment Methodology
The new law eliminates the requirement that the physician payment be split between the originating and distant site practitioners. Rather, the payment amount to the distant practitioner is equal to the current fee schedule amount for the service provided. The beneficiary is responsible for any unmet deductible amount and applicable coinsurance. It should be noted that for Medicare payment to occur, the service must be within a practitioner’s scope of practice under State law. Medicare practitioners who may bill for covered telehealth services are listed below:
- Nurse practitioners
- Physician assistants
- Nurse midwives
- Clinical nurse specialists
- Clinical psychologists and clinical social workers, except for psychotherapy services that include medical evaluation and management services (CPT codes 90805, 90807, and 90809).
The originating site receives the lesser of the actual charge or a facility fee. The facility fee will be $20 for the period October 1, 2001 through 2002, and then increased each year by the Medicare Expenditure Index (MEI) as defined in section 1842(I)(3) of the Social Security Act. These payments are separate from the usual payment system for hospital inpatient, outpatient, critical access hospital or federally mqualified health center Medicare payment systems. The Health Care Financing Administration (HCFA) published its Program Memorandum for Intermediaries and Carriers that outline the details regarding policies for receiving Medicare payment (HCFA, 2001, Revision of Medicare Reimbursement).
Limited Expansion of Technologies Covered
Under BIPA, an interactive telecommunications system is required as a condition of payment; however, BIBA does allow for the use of store and forward technologies when the originating site is a Federal demonstration program in Alaska and Hawaii.
Passage of legislation is only the beginning. As many have said, "the devil is in the details," and the details are in implementation. But even before the legislation is implemented, it is clear that there are issues that the legislation has left unresolved. Recognizing the need to refine the legislation over time, the BIPA required the Secretary of Health and Human Services to conduct a study which would identify: (a) additional services, settings, and geographic areas for which telemedicine reimbursement should be permitted and (b) additional practitioners who should be reimbursed. The study, together with recommendations for legislation, is to be completed no later than two years after enactment of the legislation. In this section, we will further explore these issues as well as others not identified in the legislation for study.
- Geographic Location: Eligible originating sites are limited to those in rural health professional shortage areas, counties outside of a metropolitan statistical area, or sites participating in a Federal telemedicine demonstration project approved by or receiving funding from the Secretary of Health and Human Services as of December 31, 2000. Thus, originating sites in urban underserved areas are not eligible for Medicare telemedicine payments unless they are part of an approved Federal demonstration. Telemedicine advocates have argued for the expansion of coverage to urban underserved areas as a logical next step if this nation is to address the growing population of medically underserved individuals found in these communities.
- Services: The BIPA greatly expands the number of services that could be covered, but does not include many of the areas where we see significant growth in telemedicine, such as speech, physical, and occupational therapy and nutritionalcounseling (especially for diabetic patients).
- Settings: BIPA explicitly limits telemedicine coverage to physician or eligible practitioner’s offices, hospitals, critical access hospitals, rural health clinics, and federally qualified health centers. Services provided to patients in nursing homes and comprehensive rehabilitation centers are not eligible for payment, even though they would be under traditional Medicare payment policies.
- Home Health Care: BIPA attempts to clarify home health agency payment for telemedicine services provided in the home. However, as we explore these issues with home care providers, many concerns arise. First, it is unclear whether current Medicare policies provide enough incentive for mainstream home health agencies to embark on providing telehome care. While savings can be shown, especially in reduced hospitalizations, these savings generally accrue to the payers, not the home health agency unless the agency is part of a health care system or managed care organization that shares in the savings (Burgess, Dimmick, & Robbins, 2001). Also studies have reported productivity gains for home health agencies that use telemedicine, but these gains need to outweigh the investment required for agencies to retool their processes and train their staff to effectively use the technologies (Puskin, 1999). This is especially true for home health agencies that are struggling to adapt to reductions in Medicare payment that have left them strapped for cash.
Secondly, the services of physicians and other eligible practitioners, which are covered by BIPA in a variety of settings, are not covered in the home. Although home care services have traditionally been provided by nurses, the ability for physicians and other primary care practitioners to make "virtual house calls" to their patients could be a critical element is helping to sustain telehome care services.
- Practitioners: In large part, the telemedicine services not covered under BIPA are provided by practitioners who are not currently eligible to receive telemedicine payment, such as speech, occupational, and physical therapists. These providers and their services are eligible to receive Medicare payment for traditional face-to-face visits. In draft legislation preceding passage of BIPA, these therapists were included. However, there was not enough support among these therapy groups to press for maintaining inclusion within the final bill.
- Licensure: For Medicare payment to occur, the service provided must be within a practitioner’s scope of practice under State law. The Program Memorandum for Intermediaries/Carriers, noted above, does not address, however, the situation in which a distant practitioner is located in one state and the patient in another. For payment purposes, is the distant practitioner subject to the laws in the state in which he or she is located or the state where the patient is located? Today, approximately 26 states have introduced Licensure laws pertaining specifically to telemedicine that may make it more difficult for physicians to practice across state lines (Department of Health and Human Services, 2001). Clearly, in these states physicians would be subject to severe legal penalties if they did not hold a full or special telemedicine license in compliance with the state laws in which the patient is located. But in the remaining states, it appears that it is under Medicare payment policies for a physician to be licensed in the state in which he or she is located. This issue, however, remains a clouded area for health policy that has implications not only for physicians, but all eligible practitioners who practice across state lines.
- Store and Forward Technologies: As noted earlier, store and forward technologies are not currently covered under Medicare’s policies, except for those applications where traditional health care practice does not require face-to-face contact, for example, radiology, pathology, or for telemedicine services provided under a Federal demonstration projects in Alaska and Hawaii. Advocates for store and forward technology reimbursement have argued that to deny payment for these technologies is tantamount to forcing practitioners to use the most expensive, rather than the most efficient, technologies to provide services. But there is not a consensus within the telemedicine field as to which services should be covered or how they should be covered. For example, dermatologists have been debating for several years as to what types of conditions can be effectively diagnosed using store and forward technologies. Others, especially third-party payers, have expressed concern that without adequate safeguards, patients may receive inadequate care and the health care system would be open to significant risk of uncontrollable increases in costs due to fraud and abuse.
A consensus needs to be developed that is based on real world experience and that is deemed reasonable from both the health professionals’ and the third party payers’ perspectives. Consistent definitions need to be developed regarding: (a) what constitutes a store-and forward consult and (b) how such consults differ from a courtesy review of a medical record or telephone consultations (generally not reimbursed separately by third-party payers). Even once these definitions are developed, the question will remain as to how best to pay for these services. On what basis should payment be set? Should they be paid the same as an interactive visit or similar to an interpretation for a radiological study? Third party payers understandably express reluctance to cover such services without consensus on these issues.
Coverage by Medicare of store and forward technologies in Alaska and Hawaii represents an important first step in development of adequate payment policies for these technologies. In a sense, these demonstrations provide a natural experiment in which to evaluate how to best pay for them. In addition, the American Academy of Dermatology is about to publish its guidelines for telehome-dermatology, which should provide a prototype for other professional groups coming to consensus on several difficult clinical issues regarding telemedicine practice, including the appropriate application of different telemedicine technologies, such as store and forward.
- Scoring: One of the most difficult challenges to the expansion of telemedicine reimbursement has been the lack of data upon which to judge its impact on third party expenditures. The Health Resources and Services Administration’s Office for the Advancement of Telehealth (OAT), working with the Center for Telemedicine Law (CTL), has developed a series of cost models that use data from OAT’s grantees to provide a more accurate estimate of the impact of expanded coverage on third party payers. Unlike previous "scoring models" that only used simulations, these models use actual telemedicine experience on which to base their estimates. Use of such models can prevent estimates that wildly overestimate or underestimate the impact of telemedicine. For example, the CTL/OAT estimates of expanding telemedicine payments under BIPA ranged from $50 to $100 million over five years, compared to an estimate of over a billion dollars mentioned when discussing legislation in earlier years (Department of Health and Human Services, 2001).
Unfortunately, for many of the expansions suggested above, there is very little data. This suggests that, at least in the near future, well-designed demonstrations will and should play a pivotal role in third party payer telemedicine policies.
- Quality: Continuous quality improvement and reducing medical errors have almost become mantras for the health care industry. Although we continue to call for quality improvements in the traditional health care system, we seldom adequately define or measure it. At the same time, there have been suggestions that electronic practice, including telemedicine, will degrade the quality of services provided. The concerns particularly arise when discussing Web consultations, wherein practitioners have no ongoing relationship with a patient or practitioner caring for a patient. On the other hand, others have argued that telemedicine provides access to services that otherwise would not be available, and thus provides a vehicle for improving, not degrading quality of care. Moreover, they argue that the availability of better information systems, which often accompany telemedicine systems, provide the necessary checks and balances to reduce medical errors. For example, in a limited study in Tennessee, Sam Burgess and his colleagues have shown that telehome care services for 34 patients with congestive heart failure reduced readmission rates and hospital stays for patients compared to the national experience (Burgess, Dimmick, & Robbins, 2001). Similar findings have been reported by Kaiser Permanente and others. Similar to the health care system in general, we are just beginning to see quality of care outcomes studies emerging for telemedicine. For the field of telemedicine to grow, far more studies of this type need to be conducted.
At the same time, however, we cannot lose sight of the need to document the operational characteristics likely to produce high quality results. To this end, the American Nurses Association, in collaboration with OAT and the Joint Working Group on Telemedicine, has created a ground-breaking monograph for practitioners, outlining key elements to be considered in developing useful protocols for clinical practice. The monograph, "Developing Telehealth Protocols: A Blueprint for Success," is actually a checklist to be used by clinicians and others in the design of effective telehealth systems (Hunter, Milholland, & Kamat, 2001). This checklist is similar to a series of technical protocols developed by OAT’s grantees to assist telemedicine providers in their purchase of equipment (OAT, 2001).
Other Third Party Payer Policies
In addition to Medicare payments for telemedicine, the following 20 Medicaid programs cover telemedicine services: Arkansas, California, Georgia, Illinois, Iowa, Kansas, Kentucky, Louisiana, Maine, Minnesota, Montana, Nebraska, North Carolina, North Dakota, Oklahoma, South Dakota, Texas, Utah, Virginia, and West Virginia (Health Care Financing Administration, 2001, States Where Medicaid Reimbursement ...is Available). Medicaid coverage is idiosyncratic, with some states only covering teleradiology, while others cover the full range of services. Restrictive regulatory policies abound. For example, the state of Nebraska covers a wide range of services, but will not reimburse for services if the provider is receiving a grant.
Several states have past laws that prohibit insurers from discriminating between regular medical and telemedicine services. These states include California, Texas, and Louisiana. OAT is currently conducting a national study of private third-party payments. Preliminary evidence from our grantees suggests that private third-party coverage is broader than documented heretofore. For example, as of January 2001, Blue Cross/Blue Shield provided at least some telemedicine coverage in 11 of the states in which OAT has grantees: California, Georgia, Kentucky, Maine, Missouri, Montana, Nebraska, North Dakota, Oklahoma, Tennessee, and Wisconsin. Blue Cross of California is going a step further to build a statewide telemedicine network to serve medically underserved populations.
Implications for the Future and the Role of the Nursing Community
Rapid advances in telecommunications and computer technology have changed the way this nation approaches all of its business and service technologies. No longer is distance the barrier to get the information we need to live our lives that it was even 50 years ago. No better can this be seen than in the growth of the Internet. According to a recent Harris poll, about 98 million Americans regularly get health information that way (Sorensen). At the same time, developments in bio-informatics, miniaturization, and computer chip design promise major advances in the prevention and treatment of disease, including the ability to provide health education and counseling services to individuals in their homes. Yet access to this new world of health care is not universally available in the United States. Three quarters of households with incomes above $75,000 have computers, compared with one sixth of households with incomes below $15,000. The telecommunications infrastructure necessary to conduct telemedicine is still inadequate or unaffordable in many rural communities in this nation, despite public policies, such as Universal Service, to make it otherwise. As discussed above, third party payer policies remain "spotty." And without adequate payment from all third party payers, most telemedicine systems cannot sustain themselves.
So why should nurses be concerned. Putting it simply, nurses have much to gain. Telehome care is largely a nursing industry. Nurses play a key role in all telemedicine systems, often being the lead coordinators and managers of the programs. Nurses have been at the forefront in adapting video teleconferencing for preventive services and in advocating for effective telehealth policies at the national, state, and institutional levels; also nurses often are the key providers of preventive services, many of which would be enhanced by access to telemedicine services. Given the technology’s potential, however, and the continued concerns of third party payers as to whether to pay for telehealth services, there remains much that needs to be done, especially if the voice of nursing is to be heard. The question for nurses is whether they will continue to be at the table when critical decisions regarding telehealth payment policies are made. Will they be there:
- When state telehealth advisory panels or commissions are created, such as those in California or Alaska?
- When a state considers telehealth reimbursement legislation or regulatory mechanisms, to advocate for coverage of preventive as well as curative care?
As the opportunities grow to adapt technologies to better meet the health care needs of this nation, we need our foremost care givers, especially nurses, at the table to provide, critique, assess, and strengthen our ability to use these technologies for improving the care of all our people, not just those who can afford it.
Dena S. Puskin, Sc.D.
E-mail - DPuskin@hrsa.gov
Since 1998, Dr. Dena Puskin has served as the Director of the Office for the Advancement of Telehealth in the U.S. Health Resources and Services Administration (HRSA). The Office currently manages 80 telehealth programs in 43 states. She is also Chair of the Joint Working Group on Telemedicine, the Federal interagency committee that serves as a forum for coordinating federal agency's programs and policies. Prior to this position, she was the Deputy Director and Acting Director of HRSA's Office of Rural Health Policy for 10 years. In that position, she oversaw the development of extensive rural and telehealth programs throughout the United States.
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Burgess, S., Dimmick, S., & Robbins, S. (2001). Cost of care reductions using telehealth: A comparative analysis. Paper presented at the American Telemedicine Association Annual meeting. Fort Lauderdale, FL, June 2001.
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© 2001 Online Journal of Issues in Nursing
Article published September 30, 2001
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