The SUPPORT for Patients and Communities Act (“the Act” or “the SUPPORT Act”), signed into law by President Trump on October 24, 2018, is intended to combat the growing opioid crisis in the United States. The Act aims at preventing opioid addiction and misuse and enhancing access to care for those who have substance use disorders.

A key aspect of the Act is the expanded Medicare coverage of telehealth services to beneficiaries in their home (see Section 2001 of the Act). Currently, and historically, Medicare has restricted coverage of telehealth services to beneficiaries who reside within certain geographic rural areas and who seek such services at specific “originating sites” (patient beneficiary’s home is not included in the current Medicare definition for “originating site”). The Act amends 42 U.S.C. § 1395m(m) to eliminate these coverage restrictions for “an eligible telehealth individual with a substance use disorder diagnosis for purposes of treatment of such disorder or co-occurring mental health disorder, as determined by the Secretary [of Health and Human Services].” With this amendment in place, health care providers may now be reimbursed for providing eligible substance use disorder services to Medicare beneficiaries in their homes via telehealth. Although the Act does not provide for any “facility fee” reimbursement for telehealth services provided to beneficiaries in their homes, the Act requires reimbursement be provided to physicians and other health care practitioners furnishing these services at the same rate as they would otherwise receive if providing the same services in-person.

It is important to note that while Section 2001 of the Act takes effect on July 1, 2019, it authorizes the Secretary of the U.S. Department of Health & Human Services (“Secretary”) to implement these amendments immediately by creating a final interim rule.  The Act also mandates that the Secretary report on the impact of this legislation on: (1) the health care utilization (and in particular, emergency department visits) related to substance use, and (2) “health outcomes related to substance use disorders,” including opioid overdose deaths. The Act provides $3 million to the Centers for Medicare & Medicaid Program Management Account in order to carry out these reporting requirements, which must be completed within five years.

Another key aspect of the Act mandates that the U.S. Attorney General (“Attorney General”) promulgate final regulations that specify (1) “the limited circumstances in which a special registration under this subsection may be issued” and (2) “the procedure for obtaining a special registration.” Under 21 U.S.C. 831(h), as amended by The Ryan Haight Online Pharmacy Consumer Protection Act of 2008 (“Ryan Haight Act”), this special registration would allow health care providers to prescribe controlled substances via telemedicine when legitimately necessary, including when an in-person evaluation is not possible. As discussed in one of our recent TechHealth Perspectives blog posts, despite the statutory mandate in the Ryan Haight Act passed more than eight years ago, the Attorney General has not yet issued any regulations or guidance on how to obtain this special registration. The Drug Enforcement Administration (“DEA”), the federal agency delegated authority to promulgate these regulations by the Attorney General, has also not promulgated any regulation or other guidance addressing special registration. The SUPPORT Act gives the Attorney General until October 24, 2019, to promulgate its final regulations on this matter.

Epstein Becker & Green plans to discuss the Act’s numerous provisions in greater detail in future Client Alerts.

stethescopeAs you all know, the subject of telehealth reimbursement continues to vex the community. For example, Medicare lags far behind.  According to the Center for Telehealth and eHealth Law, Medicare reimbursed approximately $14 million total under its telehealth benefit for 2014.  This represents less than .0025 percent of the total Medicare reimbursed for services that year.  Medicaid is something of a mixed bag with the vast majority of states providing some coverage for telehealth, but many lagging in coverage and reimbursement for store-and-forward services and remote patient monitoring. Generally speaking, private payers have been ahead of the curve with the majority of states having parity laws in place requiring insurers to cover telehealth services in many circumstances.

One of the issues about which I am often asked is whether there is any data surrounding private pay reimbursement for telehealth.  A paper published by the Health Care Cost Institute provides some interesting data into telehealth billings.  The good news is that telehealth has extensive room in which to grow.  Among other issues, the paper analyzed one of the largest private claims databases to analyze trends in telehealth billings from 2009-2013.  Here are some key takeaways:

  • There were 6,506 claims for services related to telehealth submitted by primary care providers (compared to the 95.9 million non-telehealth claims).
  • Family practice providers submitted the most claims for telehealth followed by internal medicine.
  • Non-telehealth service reimbursements increased every year since 2009, from $57 to $61.
  • Average reimbursements for telehealth claims, however, declined substantially after 2011, decreasing from $68 to $38 in 2013—40% lower than that for non-telehealth claims in 2013.
  • California and New York had relatively small numbers of claims when analyzed against their large populations.
  • Among seven unique CPT codes for an office/outpatient visit for evaluation or management of a patient, average telehealth reimbursements were nearly the same or lower than the non-telehealth service for six of these procedures.
  • The most commonly diagnosed problem seen by primary care providers using telehealth (in descending order) were diabetes mellitus (almost 14% of all telehealth claims); depressive disorders; acute sinusitis; biopsy of the lymphatic structure; obstructive sleep apnea; bipolar disorder; and acute upper respiratory infections.

The paper notes that despite the increased use of telehealth, claims for telehealth services to private insurers are rare which the paper acknowledges could be due to the “considerable time lag in the translation of [state telehealth policies] into provider behaviors.  There is also some discussion suggesting that low telehealth billings may be due to confusion regarding the appropriate billing codes to use.

My sense is that a lot has changed since 2013, and that should a review be done today, telehealth billings would have significantly increased.  Nevertheless, the paper clearly confirms telehealth has plenty of room in which to grow.

EHRA recent survey conducted by the Robert Graham Center, the American Academy of Family Physicians, and Anthem caught my attention. The survey was conducted to gauge the attitudes of primary care physicians regarding telehealth.  And the results make for interesting reading— providing great insight into how certain providers view and use telehealth. What struck me most is that while great progress has been made in the rate of telehealth adoption among providers, we still have a way to go. According to the survey report, state legal and regulatory issues, reimbursement, and provider training and education continue to be serious barriers to wider adoption of telehealth.  And until the landscape evolves to address these barriers, telehealth adoption is likely to stagnate despite the great promise of telehealth holds as a tool to improve quality and access.

By way of quick background, approximately 1,500 family physicians responded to the survey with 15% responding that they use telehealth in their practices (although almost nine out of 10 family physicians indicate that they would use telehealth if they were appropriately reimbursed).  Here are some other interesting takeaways from the survey.

Users of Telehealth

As you might expect, the survey report confirms what most of us in this space suspect.  First, the survey finds that physicians practicing in rural areas are far more likely to use telehealth in their practice than urban physicians (almost 29% to 11%).  Second, physicians who use telehealth are younger and in practice fewer than 10 years. Third, almost all telehealth users reported that they use EHRs in providing care to their patients.

Generally, both telehealth users and non-users agreed that telehealth has the potential to improve health care access, improve continuity of care, and decrease travel time for patients.  And while there was general agreement that patients preferred to see their physicians in-person, there was also an acknowledgment that telehealth “may represent an alternative to seeing a physician at all.”  In other words, even those physicians who did not use telehealth saw the value in its use almost to the same level as telehealth adopters.

Form of Telehealth

Among users of telehealth, approximately half have used telehealth one to five times in the past year and about a quarter report using telehealth more than 20 times in the past year. The form of telehealth used most:

  • 48.7% used real-time video
  • 30.7% used store-and-forward or text
  • 10.8% shared a computer screen using images with audio
  • 9.6% used other forms

Uses of Telehealth

More surprising for me was the variety of ways in which telehealth is being used by primary care physicians.  Survey results show the following uses:Telehealth Licensure

  • 55% for diagnoses or treatment
  • 26% for chronic disease management
  • 20% for second opinion
  • 21% for follow-up
  • 13% for other reasons
  • 16% for emergency care
  • 6% for administrative purposes

So, what does this all mean? For me, it is further confirmation that telehealth is widely accepted by physicians generally but that many barriers will need to be overcome for telehealth to become more routine among physicians and other providers. The survey report notes that “creating guidelines for the use of telehealth services in clinical practice, definitions of quality, and measurable outcomes” are a must for greater adoption. The report also underscores the need to establish “standardized reimbursement procedures” for telehealth including the development of new billing codes and reimbursement mechanisms. I wholeheartedly agree with all of those conclusions. Many stakeholders are working on solutions to one or more of these barriers. Ultimately, however, I think significant change will come from consumers and patients themselves, who will continue to demand better access and more innovative delivery models outside the conventional office visit.

medicare1As many of you know, reimbursement for telehealth services is a mixed bag.  On the one hand, private payers generally seem ahead of the curve.  Many leading private insurers reimburse for telehealth.  Generally these coverage policies provide reimbursement for telehealth services when they involve the use of real-time interactive audio, video, or other electronic media for diagnosis and consultation.  Just as significantly, more than half the states and the District of Columbia have passed telehealth parity statutes which require health insurers to provide coverage for services provided via telehealth if those services would be covered if provided in-person.  The picture for private insurer telehealth coverage is generally good and getting better.

On the other end of the scale is Medicare.  I think it is fair to say that no payer lags further behind in reimbursing for telehealth than Medicare.  The numbers tell the story.  The Center for Telehealth and eHealth Law reports that in calendar year 2014, Medicare reimbursed approximately $14 million under its Part B telehealth benefit—or about .0023 percent of total Medicare spending in 2014—a mere pittance.  The real reason for this is that the Medicare telehealth benefit was primarily intended for rural patients.  In addition:

  • The definition of “telehealth” is limited to real-time audio visual communication between provider and patient (in other words, there is no coverage for so-called asynchronous or “store and forward” technology).
  • Fewer than 100 codes are reimbursable under the telehealth benefit.
  • Other restrictions exist related to type of facility where a patient may present, and what kind of provider may deliver services (e.g., physicians, nurse practitioners).

Medicare Advantage offers more opportunities for telehealth coverage, but overall the current Medicare telehealth reimbursement picture is relatively bleak.

medicaidMedicaid Reimbursement for Telehealth

Medicaid telehealth reimbursement exists somewhere in the space between private payers and Medicare.  As you know, Medicaid provides health coverage to about 70 million low-income adults, children, pregnant women, and others.  The program is administered by states who are required to cover certain mandatory services (such as hospital and physician services, home health), but is funded jointly by the states and the federal government.  States do have flexibility to decide what optional services (such as telehealth) to cover beyond the mandatory services.  This has resulted in a patchwork of different coverage policies that vary by state.

Fortunately, there a number of stakeholders that closely track Medicaid telehealth coverage policies by state.  One of these is the Center for Connected Health Policy, which issues a quarterly report reviewing various telehealth legal and regulatory issues for all states.  In its last report (July 2015), the Center found the following regarding Medicaid telehealth coverage:

  • 47 states and the District of Columbia provide some coverage for telehealth (Iowa, Massachusetts, Rhode Island do not according to the report).
  • In many Medicaid programs, the definition of “telemedicine” or “telehealth’ for purposes of reimbursement is limited to services that take place in real time—thereby excluding asynchronous or remote patient monitoring from coverage.
  • Live video is the most predominantly reimbursed form of telehealth with almost all of the states that cover telehealth offering some type of live video reimbursement in their Medicaid programs.
  • Services provided via telephone, e-mail, or fax are seldom covered unless they are used along with other forms of care delivery.
  • Only 9 states (including Illinois, New Mexico, and Virginia) currently reimburse for store-and-forward services. Even in states that do cover store-and-forward, covered services may be iStock_000043291394_Smalllimited—such as in California, where only store-and-forward services related to teledermatology, teleophthalmology and teledentistry are reimbursable under Medicaid.
  • 16 states (including Colorado, Maine, and South Carolina) provide Medicaid coverage for remote patient monitoring although many restrictions exist. For example, in some states, coverage for remote patient monitoring is limited to home health agencies. There are also restrictions regarding the conditions which may be monitored and the type of monitoring devices that may be used.
  • 29 states reimburse a transmission and/or facility fee.
  • 29 states (including Connecticut, Kansas, and Maryland) require some form of informed consent prior to the use of telehealth.

All in all, the picture for Medicaid reimbursement for telehealth is far better than it has been in the past. Each state Medicaid program is different, so stakeholders need to carefully analyze each state’s telehealth coverage policies. My sense is that given the serious fiscal and clinical (e.g., provider shortages, network inadequacy) issues faced by many Medicaid programs, telehealth will increasingly be viewed as a means to seriously address these challenges. We are starting to see this play out in the Medicaid managed care space.

Medicaid Managed Care Coverage

By way of quick background, a majority of states contract with managed care organizations to provide services to certain Medicaid beneficiaries. Generally, these managed care plans receive a monthly premium from the states for each enrollee, and have greater flexibility to cover more services and allows the states to better target and customize services. As the American Telemedicine Association noted in its report on telehealth and Medicaid managed care published last year, “states have increasingly used [Medicaid managed care] to create payment and delivery models involving capitated payments to provide better access to care and follow-up for patients, and also to control costs.” Because of this flexibility, a number of leading Medicaid managed care plans are either already covering telehealth or are developing telehealth initiatives and pilots—especially related to telemental health and teledermatology. In my view, the future looks bright when it comes to Medicaid managed care and telehealth.

Earlier this week, the American Telemedicine Association reported an important clarification regarding the Centers for Medicare & Medicaid Services’ (“CMS’s”) plans for expanding reimbursement for telehealth services provided to Medicare beneficiaries.  The October 31, 2014 final rule with comment period regarding payments to physicians generated much excitement in the telehealth community, particularly because it opens a door, albeit only slightly, to possible Medicare coverage for remote patient monitoring services.

However, the ATA has clarified with CMS just how far this door is ajar at the present time.  While CMS has added a new CPT code (99490) for “chronic care management” (described by CMS in the final rule as a service “designed to pay separately for non-face-to-face care coordination services furnished to Medicare beneficiaries with multiple chronic conditions”), and this new code does not require the patient to be present during the care encounter, CMS still will not allow any additional payments for CPT code 99091 (collection and interpretation of physiologic data) if it is bundled with the new code 99490.  According to the article, “[CMS] will allow providers to count the time they spend reviewing data towards the monthly minimum time for billing the chronic care management code.  CMS expects that this accommodation will enhance the utilization of the 99490 service.”  As the ATA article points out, while CMS has acknowledged that data collection is a valuable service and should be incorporated into chronic care management, the CY 2015 PFS apparently will not allow additional payment for these data collection efforts.

Telehealth providers still should feel encouraged by the positive strides that the final rule makes to reimburse providers for a widening range of telehealth services provided to Medicare beneficiaries.  Interested providers should follow related Congressional efforts to pursue payment under Medicare for remote patient monitoring.  While the recent final rule may have yielded less momentum on the Medicare reimbursement front than originally thought, it is momentum nonetheless.

We all know that telehealth is going mainstream.  The numbers speak for themselves.  A leading research firm predicts that 2.8 million patients worldwide used home-based remote monitoring devices in 2012—expected to increase to 9.4 million connections globally by 2017.  Another firm projects that the number of patients using telehealth services in the United States will grow to 1.3 million in 2017, up from 227,000 in 2012.  Even less rosy projections predict growth to 2 million patients worldwide by 2017.  The news is even better in subspecialties like telepsychiatry   that are showing tremendous adoption rates all across the country.  And the federal government is voicing its support for telehealth adoption in a variety of ways including awarding millions of dollars in grant funding for telehealth projects under its Centers for Medicare and Medicaid Services Health Care Innovation Awards program.

All this good news notwithstanding, there are a number of issues and barriers that remain—many of which threaten to stifle the progress being made.  I have boiled these down to the few I think will keep the telehealth community awake at night because, in my view, they hold the greatest potential to stifle the greater adoption of telehealth.

Not Complying with State Licensure and Prescribing Laws.  I have seen a number of regional and national telehealth care models that don’t appear to be in compliance with the various state licensure and prescribing laws. This could have serious ramifications for telehealth as state regulators begin to focus more on telehealth enforcement.  Unfortunately, providing telehealth in more than one state will mean that providers need to comply with multiple state laws, which are often confusing and burdensome.  Nevertheless, telehealth providers should pay particular attention to state prescribing laws, the majority of which require a physical examination before a provider may prescribe drugs—a difficult requirement to meet for telehealth providers operating in multiple states.  Some providers seem unaware of these requirements or simply ignore them.  While I acknowledge that enforcement in this area has not historically been a priority for most state regulators, this is changing in many states as telehealth continues to blossom. As an example, I note the case of the Colorado doctor convicted in 2009 for prescribing an anti-depressant medication to a patient in California who later committed suicide.  The doctor had not performed a face-to-face evaluation nor established physician-patient relationship as required under California law.  It will only take a few similar high-profile cases to bring the kind of unwanted scrutiny that dogs other parts of the health care sector.

Lack of Highly Developed Protocols and Guidelines.  In my discussions with various state regulators and payers, there seems to be a consensus that telehealth lacks the robust, highly developed protocols, guidelines, and best practices to foster greater acceptance.  I applaud organizations such as the American Telemedicine Association for its continued work in developing a suite of protocols and guidelines for telehealth.  But a lot more needs to be done.  Physician and other health care professional organizations and trade associations need to take the lead in developing serious, well-conceived protocols and guidelines to provide the kind of uniform standards that regulators and payers rightly believe is lacking in telehealth.  Without such protocols, many regulators and payers will continue to view telehealth with skepticism—not to mention the potentially greater liability exposure that exists for practitioners operating in disciplines with no well-established protocols.

Lack of Greater Coverage and ReimbursementI have discussed before why providers not getting directly reimbursed for telehealth may not be as much of an issue as many providers believe.  Nevertheless, the lack of widespread coverage and reimbursement is preventing many providers who would otherwise consider providing telehealth from dipping their toes in the water.  To be sure, through so-called telehealth parity statutes, many more private payers cover telehelath than ever before.  But that is not enough.  Payers cite many reasons for failing to provide more telehealth coverage:

  • Not persuaded by clinical efficacy of telehealth for many indications.
  • Bias towards keeping telehealth benefit only available for rural beneficiaries in areas with shortage of health care professionals.
  • Fear of increased costs with expansion of telehealth benefit.
  • HIPAA privacy and security concerns.
  • Many studies have been inconclusive regarding efficiency, cost savings, preventable hospitalizations from the use of telehealth services.

Telehealth stakeholders have more power than they think—and should engage with regulators and payers in a coordinated way to help fashion a more coherent reimbursement approach to telehealth.  There are many developments     stakeholders could point to, including: 1) the number of newer studies showing the benefits of telehealth; and 2) the significant results achieved by the Veterans Health Administration (53% reduction in bed days of care; 30% reduction in hospital admissions), long a leader in telehealth adoption.  Absent a more coherent reimbursement approach, many providers will continue to sit on the sidelines—stalling the greater widespread adoption of telehealth.

HIPAA Privacy and Security. Telehealth HIPAA privacy and security issues are not necessarily different than those facing more conventional providers.  However, within telehealth, privacy and security issues take on greater significance given that telehealth is usually delivered by electronic means and that health information is often stored electronically.  In other words, there are ample more opportunities for unauthorized third parties to access patient health information.  Data breaches are becoming increasingly common with one study showing that 94% of healthcare organizations surveyed have experienced at least one data breach during the past two years, and 45 percent experiencing more than 5 data breaches each during this same period.  In my mind, nothing threatens the future viability of telehealth more than lax privacy and security.  We have written many posts regarding the kinds of privacy and security issues telehealth providers need to have top of mind.

Telehealth is going mainstream. Once limited to rural or remote communities, the use of telehealth is increasingly being used to address critical shortages within many medical specialties (such as dermatology, neurology, radiology, critical care and mental health), and as a more efficient means to provide health care services. Many leading nationally-recognized health care providers, health plans and others have significant telehealth initiatives underway often in partnership with telecommunications vendors and government entities.  And developments in this space tend to occur at a breakneck pace.  In fact, since our discussion with the Advisory Board, two more states have passed telehealth statutes.

However, significant barriers exist to the use of telehealth, including a fragmented and often outdated regulatory regime (both at the federal and state levels) that prevents many providers, practitioners and health plans from using telehealth as a primary treatment vehicle.  We discussed all of these issues and more in the Q&A with the Advisory Board.

Please click here to read the entire Advisory Board Q&A.

During and after a recent presentation regarding telehealth before a health care executive group, we were inundated with the following question:  Why should a hospital provide telehealth services when often times it will not get paid for those services?  It is, on its face, a great question.  After all, few of us would want to provide services we know will not be reimbursed.  But, in many ways, the question misses the boat.  While a hospital may not be paid directly for providing telehealth services, it nevertheless could significantly benefit in a number of ways that prove just as valuable to the hospital.  This is especially the case as we transition from a fee-for-service system to one rewarding quality of care, patient outcomes, and clinical integration.  In other words, measuring the value of telehealth services solely based on direct reimbursement is misguided.

The Indirect Benefits of Hospitals Providing Telehealth

The questions raised during our presentation, however, gave us an opportunity to organize our thoughts about telehealth’s “indirect” benefits.  Here are four reasons why it may be worth providing telehealth even in circumstances in which a hospital or provider is not directly reimbursed for providing the service.

  • Penalty/Cost Avoidance: Providing telehealth is a great way to avoid certain future costs, especially those related to inpatient readmissions, ED admissions, and post-acute care management.  Take readmissions—almost 20 percent of Medicare beneficiaries are readmitted to the hospital within a month of discharge.  Many of the discharges are avoidable and the result of poor transitional care.  And Medicare now reduces payments to hospitals with excess readmissions.  Telehealth interactions are one effective way to better engage patients, more closely monitor disease states, and help reduce complications—all great tools in the fight against excess readmissions.  So, in this context, using telehealth as a means to reduce readmissions (and not incur penalties) may outweigh the lack of direct reimbursement for those services.  This is a scenario likely to play out repeatedly as we transition out of fee-for-service into a system in which hospitals and providers are rewarded for the value of care they provide—not the volume.
  • Branding/Geographic Reach:  Telehealth may provide a great vehicle for a hospital to extend its brand further outside its market in ways previously inconceivable.  In many of the programs I see being implemented around the country, the institution is often providing telehealth services to other hospitals (such as rural hospitals) and facilities (clinics, physician offices) it would otherwise have little opportunity to interface with.  There are countless examples, many involving telestroke, teleICU, and telepsychiatry programs.  What is increasingly becoming clear is that telehealth is a highly effective way to increase a hospital’s market footprint just in the course of normal business.
  • Short-supply specialists. Many hospitals and other health care facilities often lack specialty care.  Some of the specialties suffering the most acute shortages include cardiology, critical care, oncology, psychiatry and neurology.  Hospitals are now turning to telehealth as a means to provide specialty care to their patients who would otherwise not have access to such care.  By leveraging the power of telehealth, many institutions are actually treating patients who would likely otherwise be unable to receive the care they need—thereby reducing further complications and potentially significant downstream costs.
  • Patient Satisfaction. Patient satisfaction with telehealth has always historically been high.  Patients report that they appreciate: i) the ability to connect with health care professionals with the expertise to treat their conditions—regardless of the distance; and ii) as well as the individualized personal care they receive from telehealth interactions.  A number of studies further confirm these conclusions.  One such study showed that patient satisfaction from the use of telehealth increased by 85 percent. Patient satisfaction, in addition to being measured in many payers’ quality matrices, plays a significant role in how a hospital is viewed in the community.

More Payers Are Reimbursing Than You Think

As we have discussed, there are many “indirect” benefits for hospitals providing telehealth—but we cannot lose sight of the fact that many payers do indeed reimburse providers for telehealth.   Many leading private insurers provide coverage and reimbursement for telehealth.  Generally these coverage policies provide reimbursement for telehealth services involving the use of real-time interactive audio, video, or other electronic media for diagnosis and consultation.  Note that an increasing number of the largest health plans have various telehealth initiatives underway that directly reimburse providers for services such as teleconsults.

There are also a growing number of states that have passed telehealth parity statutes which require health insurers to pay for services provided via telehealth the same way they would for services provided in-person.  Almost a third of all states have enacted these statutes, and another dozen or so states are considering similar legislation.  Additionally, about 44 Medicaid programs currently reimburse in some way for telehealth.  Medicare, however, lags behind other payers in reimbursing given its many restrictions—but even Medicare provides some coverage for telehealth.

Telehealth is expanding rapidly outside of the U.S. in both developed and developing countries.  Not surprisingly, the expanded use of telehealth presents many of the same regulatory and reimbursement challenges abroad that it does here in the U.S.  One region in particular that has taken steps to expand telehealth across borders is Europe, where in an effort to confront the legal issues raised by telehealth, the E.U. has removed and revisited existing regulations.  The E.U. has also issued guidance through the European Commission (an institution that is responsible for ensuring that E.U. law is applied and adhered to by all Member States and therefore a key player in regulating the use of telehealth), regarding how best to comply with the regulations in place.  In order to provide timely and effective guidance on rapidly evolving technologies, the Commission publishes staff working documents which interpret the law and provide compliance guidance, but are not legally binding themselves.  One such document is the “Commission Staff Working Document on the applicability of the existing E.U. legal framework to telehealth services”, dated June 12, 2012.  The Document provides guidance on how to comply with E.U. law, but for those in the U.S., reading this guidance also brings to light where the E.U. and the U.S. diverge with respect to key legal issues such as licensure and reimbursement.


Under the existing framework, the Europeans have done a good job providing expanded access to care and have accomplished this at least partially through their licensure rules.  The licensing structure in the E.U. is similar to the one in the U.S., wherein each individual state is tasked with licensing requirements and enforcement.  However, the E.U. system differs where cross-border healthcare, such as telehealth, comes into play because of what is called the “country-of-origin principle”.  This principle, a component of the eCommerce Directive (enacted by the E.U. in 2000 to set up an Internal Market framework for electronic commerce and to provide legal certainty for business and consumers), is the key difference between the U.S. and the E.U. regarding licensure issues.  Under the “country-of-origin principle” a service provider in the E.U. is practicing medicine legally if he or she complies with the licensure requirements in his or her own Member State and treats the patient from within his or her Member State.  This is true regardless of whether the patient is located in another Member State and irrespective of the requirements in that other Member State.

The “country-of-origin principle” is the exact inverse of how licensure works in the U. S.  Within the U.S., the doctor must be licensed in the same state as the patient he is treating regardless of whether the treatment is via telehealth.  This restricts patients’ access to doctors who are not licensed in their states and impedes access to cutting-edge technology such as remote monitoring.  To change the licensure requirements in the U.S. and make telehealth more accessible, there would need to be changes at the state level across the country, or a federal licensure law would need to be adopted.


A clear formula for how a provider would get paid for telehealth services, how much he or she would be paid, and what procedures he or she would get paid for, is crucial to the development of new health technology and the future practice of telehealth in the U.S. and in the E.U.  In the U.S., Medicare reimbursement has not kept up with the times. However, about a third of the states have adopted legislation known as telehealth parity statutes which require private insurers to cover telehealth services if they would otherwise cover in-person provided services.  In these states, as well as states without telehealth parity statutes, many health plans are beginning to cover telehealth services.

In the E.U., there is a Directive (Article 3(d) of Directive 2011/24/EU) on the application of patients’ rights in cross-border healthcare stating that cross-border health care services utilizing telehealth or other types of eHealth services must be reimbursed if the individual or patient resides in a country that reimburses the eHealth service.  This is extremely positive for individuals residing in countries that reimburse telehealth services, as they will be reimbursed if they decide to utilize telehealth services.  However, those individuals whose home countries do not reimburse for telehealth are barred from access to these technologies or doctors in other countries unless they are willing to pay out of pocket.  One example of this is Germany, where the costs of telehealth are only reimbursed by health insurers in exceptional cases.  As a rule, patients have to pay for such health services out of their own pockets.  Other countries like France reimburse several categories of telehealth services at the same levels as traditional in-person services.  French Social Security will pay for some telehealth services including teleconsultation (physicians conduct consultation remotely), teleexpertise (physicians solicit advice from peers), telemonitoring (physicians monitor remotely patient data), and teleassistance (physicians can assist nurses or other medical personnel in the completion of medical acts).  In the Netherlands, phone and e-mail consultations are reimbursed via fixed prices by health insurance companies.  Although the E.U. has yet to present a harmonized reimbursement picture, in countries like Sweden and the U.K. small telehealth projects are publicly funded.  It seems the authorities are still testing the waters before fully committing.

The different approaches taken by the E.U. and the U.S. partially reflect the different health care systems in place as well as the differences in legal structures between the two.  On the one hand, the U.S. has struggled with its fragmented approach.  On the other hand, Europe, known for its heavy regulation, has embraced a less regulated path in terms of licensure to make way for the expansion and adoption of telehealth into mainstream medical practice.  Yet in terms of reimbursement, both the U.S. and the E.U. are struggling with limited reimbursement capability.  Regulators, whether in the U.S. or in the E.U., are often criticized for not keeping up with rapid innovation.  That is also true for payors.

Oftentimes when public authorities are slow to take action, the industry and the patients themselves will adopt innovative products and technologies.  It will not be long before both the U.S. and the E.U. will be forced to see the value of telehealth and to understand that earlier development of health technology and improved incorporation of telehealth into accepted medical best practices is crucial to broader access and better health care.

When evaluating the various legal and regulatory hurdles associated with telehealth—such as licensure, reimbursement, and privacy—one hurdle that often goes overlooked is the corporate practice of medicine.  Many states have enacted laws which directly or indirectly are viewed as prohibiting the “corporate practice” of medicine.  While variations exist among states, the doctrine generally forbids a person or entity, such as a general business corporation, other than a licensed physician, professional corporation (“PC”) or a professional limited liability company (“PLLC”), from owning an interest in a medical practice or employing physicians for the purpose of practicing medicine.  These laws against the corporate practice of medicine are generally designed to prevent non-clinicians from interfering with or influencing the physician’s professional judgment, and will affect the ability of business entities to enter into agreements with physicians and other health professionals.

Some states like Florida do not have a law specifically prohibiting physicians from engaging in the practice of medicine through a corporate structure.  The Florida Board of Medicine has stated that the statutory prohibition against the unlicensed practice of medicine does not prohibit the practice of medicine by physicians as employees of a Florida corporation or partnership.  California, on the other hand, prohibits the corporate practice of medicine, which among other things, requires that business or management decisions and activities resulting in control over a physician’ practice of medicine, be made by a licensed California physician and not by an unlicensed person or entity. In order to avoid the direct violation of state prohibitions on the corporate practice of medicine, many companies use the so-called “friendly PC” model.  Under the “friendly PC” model a PC, PLLC, or other legal entity permitted in the state, whose shareholders are all physicians, employs the licensed health care professionals and contracts with a Management Service Organization (“MSOs”) that provides management services to the PC.  The PC is kept “friendly,” or aligned through the use of a stock transfer restriction agreement and/or by the MSO employing the physician owner.

Generally, the restrictive stock transfer agreements prevent the member from transferring his or her shares without the consent of the MSO.  Additionally, these agreements usually require the member to transfer the shares in the PC to an individual selected by upon demand by the MSO. The combination of business management control and the threat of exercising its rights under the transfer agreement allow the MSO to maintain control over the administrative and management side of the entity without infringing on the professional judgment of the physicians.

We should note that enforcement by relevant authorities (e.g., state boards of medicine) regarding the prohibition against the corporate practice of medicine with respect to the “friendly PC” model generally is inconsistent.  As a practical matter, the most frequent forum in which the issue is asserted is in the context of commercial disputes between the MSO and the physician owners of the PC or PLLC it manages. Specifically, in these disputes the physician owners seek to invalidate all or part of the agreements between themselves and the MSO by arguing that the agreements are unenforceable as a matter of law because it creates a relationship that constitutes the corporate practice of medicine.

Although there is no hard and fast rule as to when a given arrangement may be deemed to constitute corporate practice, the focus in any enforcement action likely will be on the level of control the MSO exercises over the operation of the medical practice, specifically the professional judgment of licensed health care professionals. Where a high level of control exists, the arrangement may be found to be a sham intended to disguise the de facto practice of medicine by an unlicensed entity.  Factors that will be considered in evaluating whether a structure violates the prohibition on the corporate practice of medicine include the extent to which the MSO controls decisions or extracts revenue.

Telehealth companies, along with licensure and all the other regulatory issues we have written about in this blog, also need to take the corporate practice of medicine into consideration when developing their business models.  We advise that companies look into whether the states into which they are considering operating have a prohibition against the corporate practice of medicine, and if so, analyze how their model will need to be modified to fit within the law.  The good news is that many states (e.g., Hawaii, Mississippi, Ohio) have no such prohibition.