Telemedicine and Employers: The New Frontier

By René Y. Quashie and Amy F. Lerman

This post originally appeared in Epstein Becker Green's Take 5 Newsletter on Feb. 25, 2015.

Telemedicine, the remote diagnosis and treatment of patients using electronic communications, has gone mainstream, and employers are paying attention. The numbers speak for themselves. A recent Towers Watson study focusing on employers with at least 1,000 employees concluded that U.S. employers could save up to $6 billion per year if their employees routinely engaged in remote consults for appropriate medical problems instead of visiting emergency rooms, urgent care centers, and physicians’ offices.

Attitudes towards telemedicine more generally in the United States also have undergone a significant shift:

30 percent of patients already use computers or mobile devices to check for medical or diagnostic information;
74 percent of consumers would use telehealth services if given the opportunity;
76 percent of patients prioritize access to care over the need for human interactions with health care providers; and
70 percent of patients are comfortable communicating with their health care providers via text, e-mail, or video, in lieu of seeing them in person.

Just as significantly, telemedicine is increasingly viewed as an efficient and cost-effective care delivery vehicle, due to several factors:

a health care system transitioning from fee-for-service to one where reimbursement is closely tied to quality and patient outcomes;
an increase in the use of integrated delivery models such as accountable care organizations and medical homes; and
the relative ubiquity of sophisticated health care technologies.

Indeed, according to a recent Forbes magazine article, utilization of telehealth services will increase from 250,000 patients in 2013 to an estimated three million patients in 2018.

Employers, in particular, are paying close attention to developments in telemedicine for another reason: the looming “Cadillac Tax.” Starting in 2018, a 40 percent excise tax will be imposed annually on health plans with premiums exceeding $10,200 annually for individuals and $27,500 annually for families. Given this impending tax, employers are looking for efficient ways to cut their employee health care costs. Telemedicine has become an extremely viable option for several reasons:

Many employees hesitate to take time off work and to pay the copayments associated with physicians’ visits, particularly for ailments perceived as minor.
Many employees forego physician visits entirely, causing relatively minor health issues to sometimes escalate into costly conditions.
Although some employers have established onsite clinics where employees can receive sick care and preventive care services, there are high costs associated with creating these clinics.

According to the Towers Watson study, only about 20 percent of U.S. employers offer telemedicine services to employees today, but nearly 40 percent of employers surveyed said that they plan to offer access to such services in 2015, while 33 percent are considering offering access to telemedicine services within the next three years. It is clear to see why. Effective use of telemedicine services could eliminate 15 percent of physician office visits, 15 percent of emergency room visits, and 37 percent of urgent care visits. This all results in significant savings to employers that cover any part of the costs of their employees’ health care.

Employers considering the inclusion of telemedicine services in their employee benefit offerings should pay attention to some significant, but not insurmountable, legal and regulatory issues implicated by the use of telemedicine. In brief, those issues include:

Licensure: State licensure laws are a major stumbling block to the interstate practice of telemedicine. With limited exceptions, providers must be licensed in every state in which they intend to practice medicine, and each state has its own licensure requirements. Generally, an out-of-state physician (absent certain exceptions) must obtain a full and unrestricted license to practice medicine on patients in a particular state. This tension creates a patchwork of inconsistent laws.

The Federation of State Medical Boards has developed an Interstate Medical Licensure Compact (“Compact”) that would facilitate license portability and the practice of interstate telemedicine. So far, 10 states have introduced bills seeking to become Compact states. There also is a Nurse Licensure Compact in place in 24 states, but it only covers registered nurses and licensed vocational nurses. Compacts for nurse practitioners and physician assistants are being developed.

Physician-Patient Relationships: Among the factors required by states to establish a physician-patient relationship is an evaluation or examination of the patient by the treating physician. This is especially important when the treating physician is prescribing medications for the patient. States have different requirements that must be met in order for a proper examination to have occurred—some require an in-person evaluation or physical examination, while others permit physicians to examine patients using telemedicine technologies.

Privacy & Security: Numerous privacy and security issues are implicated by the use of telemedicine technologies, including compliance with federal and state privacy and security standards, data management, data sharing (and management responsibility for such sharing) with other providers, and data storage.

Medical Liability: Adapting existing principles of medical malpractice liability to telemedicine is a challenging task, especially regarding what constitutes the applicable “standard of care.”

Fraud & Abuse: Telemedicine arrangements must comply with federal and state health care fraud and abuse laws, including anti-kickback statutes and/or physician self-referral prohibitions.

Employers seeking to access the telemedicine market must carefully assess the legal and regulatory requirements, and limitations, of any potential arrangements.

[Image credit: "Woman with Blood pressure monitor" by Tunstall licensed under CC BY 2.0]

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