Telemedicine: The Evolution of Virtual Services and Impact on Provider Compensation
Traditionally, seeing a doctor when you’re unwell has been anything but convenient. It often involves taking time off work, navigating traffic, and enduring crowded waiting rooms – all while potentially exposing others to illness. Add to that the trek to the pharmacy, and the entire process can leave you feeling worse than when you started. Enter telemedicine: a game-changing approach that brings healthcare directly to your home, saving time, reducing stress, and minimizing exposure. As telemedicine reshapes patient experiences, it also has profound implications for provider compensation and the delivery of care. Let’s explore how virtual services are revolutionizing healthcare and impacting provider compensation.
Telemedicine involves getting help from healthcare professionals over the phone, on a computer with or without video. While the idea of telehealth and telemedicine has existed for many years, it was not a widely accepted practice by most insurers. The evolution of virtual medicine became a necessity due to COVID-19 restrictions in the United States. Since people could not leave their homes and be in proximity to the general population and doctors’ offices were closed, telemedicine became a safe way to get care when it would have been much harder, and even in some cases impossible, to do so.
Is Telemedicine Here to Stay?
With most or all of the social restrictions behind us, the question is: will telemedicine stick around, or was it just a temporary solution? Most believe telemedicine will continue to be available, perhaps with some limitations compared to the COVID-19 timeframe, since it has had so many positive benefits for patient access to healthcare, care that was needed but had several barriers, such as mental health care, and improved patient compliance. In calendar year 2025, according to the Physician Fee Schedule (“PFS”) final rule[i], The Centers for Medicare & Medicaid Services (“CMS”) will continue to extend certain telehealth services for Medicare beneficiaries and many state Medicaid programs have followed suit making coverage and reimbursement more available than prior to COVID-19. It is important to realize, however, not all pandemic-era flexibilities will remain and may have a negative effect on access and affordability.
So, how might all this impact provider compensation? Changes in code sets, the addition of services, expansion of allowable locations, volumes, and reimbursement all affect provider compensation models. Telehealth increases productivity and productivity models are one type of a typical fee for service compensation model. Telehealth, as long as it’s billed correctly, has a lower denial rate and percentage of collection models are impacted by changes in reimbursement. Hourly compensation models are not as impacted by telehealth due to the nature of paying for the provider’s time regardless of the number of encounters. Independent contractor models are impacted by the technology utilized (varying from the simplicity of a phone telemedicine visit to a telemedicine cart for rounding in a hospital). Therefore, compensation models regardless of the design when telemedicine is integrated will impact compensation as increased demand continues to rise.
Evolution of Telemedicine
Doctors, hospitals, and clinics quickly adopted telemedicine to keep patients safe while still offering care. This shift was made even easier with ever emerging new technology and electronic applications (“apps”) for tracking health information. The government supported it by creating new and temporarily changing some rules, allowing more types of telemedicine services to be covered by insurance. Common telehealth services for most people involve routine check-ups, acute care needs, ready access to specialty care in rural and underserved areas where specialty care doesn’t reach or the needs of the patients in that area outstrip the available providers’ capacities. Mental health care has particularly seen a surge in volumes like never before. After years of resistance from third-party payors to adopt telehealth, its rapid adoption due to the pandemic revealed how useful telemedicine could be.
Now as technology and new business ideas surface, the application of telemedicine continues to expand. Remote patient monitoring, applications, and programs to enhance therapy and patient integrated interaction continue to evolve and much of the medical community continues to buy-in to new technology and care models. Whole companies have surfaced and continue to grow to support these types of services.
Telemedicine’s popularity continues to grow. Sullivan Cotter and Associates now lists five (5) virtual specialties in the 2024 Physician Compensation and Productivity Report: primary care, neurology, psychiatry, urgent care, and diagnostic radiology. In comparison, the 2020 report listed none. TeleNeph’s CEO, Ron Kubit, reports an increase in demand for end-stage renal disease (“ESRD”) patient care by nephrologists. Maternal fetal medicine is another specialty with growing telemedicine use. Psychiatric telehealth services have expanded outpatient access by 30% and doubled the number of child and adolescent psychiatrists and psychologists available for staffing.[ii] Kaiser Permanente reports 32% of primary care visits were provided via telehealth in 2023 compared to 18% in 2019.[iii]
Telemedicine’s Impact on Provider Compensation Models
The changes in care setting and code used impact professional reimbursement and the provider compensation models in varying ways. For example, in 2023 a level three (3) established patient office visit had 1.30 work relative value units (“wRVUs”) assigned and a level two (2) subsequent hospital visit having essentially the same documentation and complexity is valued at 1.59 wRVUs. A physician who is paid per wRVU is impacted by the setting and requisite code set utilized.
A physician who is compensated relative to their professional collections is impacted by the reimbursement rates for virtual visits. According to Foley & Lardner LLP’s ‘50-State Survey of Telehealth Insurance Laws’, more than double the number of states have reimbursement provisions in 2024 compared to 2019 (33 compared to 16).[iv] These reimbursement provisions can include reimbursement parity for telemedicine and in-person visits, ceilings or floors on reimbursement or how reimbursement is negotiated.
The technology adopted for telemedicine impacts independent contractor compensation. It is customary to include consideration for overhead expenses for non-employed physicians. A primary care physician providing telemedicine via cell phone has a much lower overhead burden than a physician group providing inpatient telehealth using a telemedicine cart set up to a health system.
Challenges and Risks of Telemedicine for Providers
In telemedicine, billing and coding present unique challenges which can put providers at risk of not receiving full or accurate reimbursement for their services for simple mistakes. Telemedicine documentation requirements are new and reimbursement without the required details to support the claims may seem stricter than in-person visits and services. For billing to be compliant, providers must include details to clearly justify the services provided, the medium in which they were rendered, the time spent and rationale for the medical necessity of the services rendered in this non-traditional way. This can be challenging if they are not fully aware of the additional requirements.
The frequency of encountering providers rendering services spanning more time than is possible in a workday or even actual 24-hour period, also known as an “impossible day”, is also on the rise. This often occurs unintentionally due to an unrealistic estimation of their time spent on care services, automated time capture, lack of time capture, or even due to the rapid, back-to-back nature of virtual visits. Consequentially the occurrence of large increases in a provider’s productivity raises red flags internally and with third-party payors which can lead to audits or claims denials.
Ensuring accurate telemedicine billing requires not only careful documentation but also a commitment to staying up to date on billing codes and regulation limitations. Without diligence in documentation and appropriate code / modifier use and operational monitoring for accuracy, providers risk non-compliance trends leading to reimbursement issues and resulting in financial penalties.
Advantages of Embracing Telemedicine for Providers
Telemedicine creates another avenue for patient access, especially in remote or underserved areas. Providers can check in with patients outside of traditional office hours, reducing overhead costs of a staffed office. Certain specialties benefit from seeing patients in their home environments, such as a neurologist observing and assessing patient mobility at home, or allergists identifying clues for allergens in the home.
Future Trends: Technology and Policy Innovations
Artificial Intelligence (“AI”) is emerging as a significant partner to telehealth. AI assists radiologists with image interpretation and in detecting abnormalities. Remote patient monitoring (“RPM”) is proliferating with wearable devices and sensors. Virtual reality and augmented reality technologies integrated with telemedicine platforms will allow for worldwide real-time collaboration between surgeons. Hospital at home initiatives use both telemedicine for “rounding” and RPM monitoring.
The Verdict: End or Future of Telemedicine
Medicare and other payors have recognized a need to scale back the temporary provisions from the public health emergency, however many of the service delivery methods have had such a positive impact on beneficiary access to care and the quality of care it seems it will remain in effect even if on a more limited basis, according to the Medicare 2025 Physician Fee Schedule (“PFS”) Final Rule.
As published in their summary of the PFS final rule, “Absent Congressional action, beginning January 1, 2025, the statutory limitations that were in place for Medicare telehealth services prior to the COVID-19 PHE will retake effect for most telehealth services. These include geographic and location restrictions on where the services are provided, and limitations on the scope of practitioners who can provide Medicare telehealth services. However, the final rule reflects CMS’ goal to preserve some important, but limited, flexibilities in our authority, and expand the scope of and access to telehealth services where appropriate.”
As such, CMS will allow some telehealth services to continue on a provisional basis through 2025, including certain cardiac rehab and behavioral health services, while also permitting two-way audio-only communication for patients who cannot use video technology in certain situations. Other highlights include:
- Telehealth service expansion: Some telehealth services will be retained, and some will even be added, such as caregiver training service (“CTS”) which is caregiver behavior management and modification training intended to enhance the care given to an individual patient.
- Audio-only visits: As patients with healthcare access challenges have benefited from telehealth and telemedicine, CMS will continue to allow audio-only services when patients aren’t able or refuse to use video which is intended to support patients in rural areas and / or those will limited technology skills.
- Virtual Direct Supervision: Virtual supervision allows supervising physicians to oversee certain care types remotely using real-time video, supporting continuity of care while accommodating the needs of healthcare facilities and patients and CMS will continue virtual supervision.
Whether telemedicine is here to stay is highly dependent on CMS and other payors and will impact provider compensation. If telemedicine is restricted, providers whose practices have a high portion of telemedicine services and have a productivity-based compensation plan (such as compensation per wRVU or number of encounters) will probably see their compensation decrease. Providers with a specialty (such as behavioral health) who are impacted by the expansion in telehealth services may see their compensation favorably affected. For more information, please contact Kelly Loya (KLoya@AskPHC.com) or Carey Lowe-Curry (CLowe-Curry@AskPHC.com).
[i] Calendar Year (CY) 2025 Medicare Physician Fee Schedule Final Rule; Medicare Parts A & B; November 1, 2024; https://www.cms.gov/newsroom/fact-sheets/calendar-year-cy-2025-medicare-physician-fee-schedule-final-rule
[ii] Psychiatry: Masson, G., Adams, K., Jensik, L., & Plescia, M. (2021, November 15). ‘More ill, more desperate’: How hospitals are responding to changing mental health trends. Retrieved from Becker’s Hospital Review: https://www.beckershospitalreview.com/public-health/more-ill-more-desperate-how-hospitals-are-responding-to-changing-mental-health-trends.html
[iii] Kaiser: https://www.ajmc.com/view/telehealth-insights-from-an-integrated-care-system
[iv] Foley & Lardner LLP’s 50-State Survey of Telehealth Insurance Laws
