March 23, 2018

Telemedicine at a Tipping Point

by Lisa Bielamowicz

THE GIST

As the reimbursement system evolves to keep up with the expanding capabilities of telemedicine, providers and payers should view virtual care as a key tool to drive consumer loyalty and engagement

THE FACTS

OUR ANALYSIS

1. A majority of Medicare patients now have coverage for telemedicine, largely through providers who are in downside risk arrangements

CMS historically has offered little reimbursement for telemedicine, mainly covering real-time virtual visits for patients in rural areas. The CHRONIC Care Act now extends coverage for patients in nearly all downside risk ACOs. The Act also expands coverage for Medicare Advantage patients, allowing those plans to include telemedicine services in their bids. With those additions, a majority of Medicare beneficiaries will now have access to telemedicine coverage.

Historically, the government’s main concern in extending telemedicine coverage has centered on cost, specifically whether telemedicine visits substitute for in-person encounters or are additive. Recent research suggests that it may be the latter, especially for minor acute needs. A study published last year in Health Affairs estimated that only 12% of direct-to-consumer telehealth visits replaced visits to other providers. The remaining 88% were new utilization—and increased cost of care by $45 per user for simple needs like acute respiratory infections.

It’s easy to see what’s happening from a patient’s perspective. You’re home feeling awful with a sore throat and low-grade fever. It’s a hassle to leave the house and head to the doctor’s office, even if an appointment were available. Much easier to simply fire up the laptop and do a telemedicine visit from your couch. The patient who may have otherwise been content with a day of ibuprofen, rest and Netflix can now log a visit to the doctor with the click of a mouse.

It’s not clear whether this increased use of services is a good thing or a bad thing. Perhaps it reveals a heretofore-unmet demand for primary care. While a sore throat may get better without intervention, for many conditions, particularly chronic disease, more frequent, low-cost provider interactions may be better for patients. The solution of the CHRONIC Care Act is simple: in risk-bearing ACOs and MA plans, let’s just let the providers decide whether the increased utilization is warranted.

2. Commercial payer adoption of telemedicine has accelerated even faster, because consumers (and employers) like it

For commercial insurance plans and Medicaid programs, states regulate telemedicine coverage and scope of practice rules. While there is significant variability across the country, the trend is toward more states moving toward increasing coverage and loosening practice restrictions. The map below highlights states with favorable reimbursement and provider licensure regulations, as evaluated by the American Telemedicine Association (registration required).

Where Medicare’s primary concern has been that telemedicine might unnecessarily increase costs, commercial payers have a different calculus. They’re directly offering branded telemedicine services, with the hope that enhanced convenience is a loyalty driver for consumers and employers. (As an example, look at Optum/United Healthcare’s NowClinic)

Although good data is hard to find (because surveys are often sponsored by vendors) consumer interest in telemedicine is growing. One survey reports that one in five patients would change physicians to one who offers telehealth. And there is little doubt that the number of telemedicine visits is growing, with over 1M visits in 2015 alone. This is exactly what you’d expect as consumers demand the same “Amazon standard” of convenience and access from healthcare that they get in other areas of their lives. Employers view telemedicine as a way to provide low-cost access in the wake of high deductibles, and 9 in 10 large employers plan to make telemedicine available to their employees at some point.

Virtual visits provide a way for health insurers to build consumer engagement and loyalty. I caught up with a colleague this winter whose family was dealing with a bout of the flu. He raved about a virtual visit he’d had with Teladoc, which he directly accessed through his insurer. “It’s the first time I ever remember the insurance company doing something that made my life easier,” he told me. If payers can develop this kind of positive feeling across their membership, they’ll have a great opportunity to generate direct consumer loyalty to the health plan.

3. Providers who wait for direct reimbursement for telemedicine risk missing an opportunity to create consumer value

While many insurers are extending direct-to-consumer telemedicine across their networks, most health systems are still just dabbling in the space. Nearly every system or large physician group we work with has a handful of telemedicine pilots in the works. But few have pulled the trigger to scale virtual care broadly, citing resistance from physicians or lack of direct reimbursement. The common refrain: there’s no way our docs will trade off a paid, in-person visit for one they can’t bill for.

Health systems who wait for reimbursement streams to appear risk losing the greater benefit of virtual care: the chance to deliver consumer value. Insurers, retailers and new entrants (think Amazon) will continue to expand telemedicine offerings. The question is whether providers will be able to hold on to in-person visits as they increasingly convert to virtual interactions. Health systems must view the investment not as potential revenue lost, but as an opportunity to garner long-term consumer loyalty.

Health systems are also best positioned to deploy telemedicine as an integrated part of a patient’s broader care plan—particularly important where virtual visits are used to support chronic disease management.

Systems should determine what bundle of virtual medicine solutions creates the most value. How can access for minor acute needs be expanded? When is a “live” visit necessary, and when do patients just need to communicate with their doctor? Where can investment in provider-to-provider virtual consults lower costs? And most importantly, how do providers capitalize on “system” advantage: integrating virtual access into their spectrum of care offerings to help patients manage their ongoing health needs?

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