Telemedicine, the delivery of primary and specialty medical care enabled by telecommunication devices, offers less costly, more personalized health care options than conventional in-person visits. Telemedicine allows patients to connect with physicians and other health professionals at any time, from many locations, to receive a diagnosis or treatment.REF Harnessing the power of innovative technologies, telemedicine also can maintain or improve the quality of established medical services.REF

Given the vast challenges facing American health care, the rapidly growing interest in telemedicine is timely. Patients and private payers, especially employers, are looking for a highest-value health care system that generates better patient outcomes at a lower cost over time than current options.REF Doctors, health systems, and other providers are also exploring ways to integrate telemedicine into their care delivery models. The potential benefits of using telemedicine to decrease America’s health care spending—which consumed around 18 percent of the nation’s gross domestic product in 2017REF—can amplify access to broader physician networks, improve care coordination, and offer more reasonable costs for payers and patients.

While policymakers have made some efforts to clear the way for telemedicine, these efforts have been predominantly isolated and sporadic. Policymakers should undertake further statutory and regulatory reforms with the vision of patient-centered health care as their compass. Eliminating artificial obstacles that restrict the adoption of telemedicine will maximize the fiscal, individual, and social benefits of telemedicine. Specifically, policymakers should review statutory definitions as well as reimbursement, licensure, and tax policies to better accommodate the growth of telemedicine.

What Is Telemedicine?

As defined by the Federation of State Medical Boards (FSMB), telemedicine is “the practice of medicine using electronic communication, information technology or other means between a physician in one location and a patient in another location with or without an intervening health care provider.”REF An intervening health care provider, also known as a telepresenter, is a health professional, such as a physician, nurse practitioner, or physician assistant, who is at the same location as a patient to assist with physical examinations, such as evaluating flu symptoms,REF during a telemedicine consultation.

Scope of Services. Telemedicine is not a medical specialty itselfREF but rather a mode of care delivery, by which Internet-enabled tools are used to administer traditional or enhanced medical care without geographic constraint.REF The scope of telemedicine services can include nearly every medical specialty, from allergy and immunology to urology. While the term “telemedicine” is used to refer to the delivery of medical care enabled by telecommunications technology, “telehealth” is more frequently used to describe the wider range of ancillary health-related services and less-than-comprehensive virtual health options, such as telepharmacies, telebehavioral health services, and the diverse digital technologies that have materialized with the development of low-cost mobile devices. One of the newest classes of telehealth is digital therapeutics, which are software programs that can use patient data to “prevent, manage, or treat a broad spectrum of physical, mental, and behavioral conditions.”REF

Contemporary telemedicine can be divided into four modalities: (1) store-and-forward, (2) synchronous, (3) remote patient monitoring (RPM), and (4) autonomous. Store-and-forward telemedicine can be patient-to-provider or provider-to-provider with the transmission of patient images or recorded data to a physician for assessment.REF Synchronous telemedicine involves live communication between a patient and provider or a teleconference of physicians.REF Remote patient monitoring is the real-time streaming of patient data from an approved site, such as a hospital or patient home, for professional analysis.REF Autonomous telemedicine is the actual delivery of medical care using or integrating stand-alone technology, ranging from artificial intelligence to robotic drones.REF To date, live video is the modality most frequently reimbursed by health insurance companies.

Growing Interest in Telemedicine

Telemedicine can provide affordable, high-quality medical care. Subsequently, there is a burgeoning interest in telemedicine among payers, patients, and health professionals alike.

Employer interest in telemedicine is at an all-time high. In 2014, 90 percent of health care executives surveyed in a Foley & Lardner telemedicine report stated that their care provider organizations had “already begun developing or implementing a telemedicine program.”REF Today, 74 percent of large firms offering health coverage include plans with at least one telemedicine service, a sharp increase from just 63 percent in 2017REF and a major increase from the mere 27 percent in 2015.REF By 2019, 96 percent of the largest U.S. employers will include telemedicine coverage in their benefits packages.REF

Many health systems and hospitals are equally as interested in offering telemedicine care. Kaiser Permanente of Northern California, for instance, reported in 2016 that “its virtual (e-mail, telephone, and video) communications exceeded in-person visits” for the first time.REF The first virtual hospital, Mercy Health of St. Louis, which opened its bed-less facility in 2015, is home to telestroke capabilities, an electronic intensive care unit (eICU), and a remote care program that monitors patients in their homes across multiple states.REF CareMore, a care system with integrated health plans for Medicare and Medicaid enrollees, focuses on improved outcomes for chronic patients through support strategies that integrate remote patient monitoring. The results: 42 percent lower hospital admission rates for seniors, 60 percent fewer amputations for diabetic patients, lower per member per month (PMPM) spending, and 40-hour work weeks for physicians with the majority of time spent on patient interaction.REF

Patients are also warming to telemedicine. In 2013, 350,000 patients used telemedicine services; by 2017, there were 3.84 million.REF One reason for this trend is that telemedicine encounters are increasing patient satisfaction. For example, a Massachusetts General Hospital study reported that 90 percent of patients receiving virtual consults noted that “the encounters significantly improved their healthcare experience.”REF

Today, the average patient spends over 100 minutes commuting, waiting, and filling out paperwork for every 20 minutes of face-to-face time with a doctor.REF While rural patients struggle with long-distance commutes, patients in major metropolitan areas face difficulties with scheduling in-person physician visits, waiting an average of 21.7 days for an initial face-to-face consultation with a primary care physician, and up to 44.8 days to visit in-demand specialists, such as rheumatologists.REF Since virtual physician visits minimize appointment-related logistics and transportation burdens,REF it is unsurprising that urban telemedicine use increased by 629 percent between 2011 and 2016.REF Demographic trends suggest that demand for telemedicine will continue to rise; 40 percent of millennials, according to a 2018 Employer Benefit Research Institute survey, report that telemedicine is “extremely or very important” to them.REF

Beyond payers and patients, medical professionals are also taking serious steps to improve and advance telemedicine. For example, state medical boards in New York, North Carolina, Oklahoma, and Pennsylvania adopted the American Telemedicine Association standardized telemedicine practice guidelines in their rules. These efforts are to ensure that the practice of telemedicine upholds an “in-person” standard of care nationwide.REF

Medical educators have also advocated for formal telemedicine training curriculums for students and residents. In the October 2018 issue of Annals of Emergency Medicine, for instance, researchers at New York-Presbyterian Weill Cornell Medical Center piloted a standardized simulation-based telemedicine curriculum that assessed four telemedicine competenciesREF with physicians, nurses, and physician assistants from various specialties.REF

Existing and Potential Benefits of Telemedicine

A literature review of telemedicine offers a glimpse of its potential.

Increased Access for Rural and Underserved Patients. Rural America faces serious health care access problems. In 2015, the American Hospital Association reported that roughly 20 percent of Americans were living in rural areas with restricted access to either primary or specialty care,REF while the National Rural Health Association stated that 673 rural hospitals—one-third—are at risk of closing due to financial challenges.REF In addition to fewer care locations, rural areas are also limited by having only 39.8 physicians per 100,000 people compared to 53.3 physicians per 100,000 people for urban patients.REF As the availability of health care resources in rural areas diminishes, telemedicine holds the potential to equalize—or at least improve—access to care for patients in rural and other underserved communities. It is no wonder that the use of telehealth services in rural areas increased by 960 percent from 2011 to 2016.REF

In 2017, a JAMA Surgery study found that roughly one in 10 rural patients waits nearly 30 minutes for emergency personnel to arrive at his home.REF In Mississippi, researchers have developed a solution to this problem: an aerial telemedicine ambulance. This ambulance, the Healthcare Integrated Rescue Operations (HiRO) drone, is equipped with “smartglasses”REF for live telemedicine consultations, a holographic electronic health record (EHR) display, and a medical kit with supplies. This approach has resulted in faster emergency response times, as demonstrated during participation in federal disaster exercises.REF

Telemedicine also offers rural patients and those in underserved communities access to world-class care at institutions like the Mayo Clinic as well as enhanced flexibility in time and location for physicians and patients alike.REF Remote patients can even participate in virtual clinical trials enabled by telemedicine devices.REF For those who face limited one-on-one time with physicians, as well as delayed scheduling for appointments, some telemedicine options offer immediate consultations with physicians. Direct-to-consumer (DTC) telemedicine options are numerous and affordable, allowing patients to choose individual consultations when they need care most or to augment their current insurance plans while paying minimal out-of-pocket costs for services.

Improved Care Coordination and Patient Outcomes. Telemedicine is an effective tool for managing chronic conditions in real time and reducing the frequency of emergencies rooted in chronic diseases.REF In a September 2014 literature analysis published in Telemedicine and e-Health, reviewers found that the telemonitoring of chronic heart failure (CHF) patients for disease management resulted in a substantial decrease in mortality, between 15 percent and 56 percent, compared to CHF patients who received traditional care.REF

In a 2016 study published in the American Journal of Respiratory and Critical Care Medicine, researchers found that the implementation of a telemedicine disease management program for chronic obstructive pulmonary disease (COPD) patients, which engaged patients to report their daily respiratory symptoms in their smartphones, reduced emergency room (ER) visits by 53 percent.REF

A 2013 review of 755 studies on telemedicine for mental health revealed that telemental health services are “effective for diagnosis and assessment across many populations (adult, child, geriatric, and ethnic) and for disorders in many settings (emergency, home health) and [appear] to be comparable to in-person care.”REF

Telemedicine can also reduce lengths of stay and hospital readmission rates. A five-year study assessing the outcomes of Mississippi trauma patients showed that patients treated via telemedicine had shorter lengths of stay at local community hospitals by 45.5 hours and shorter transfer times from these hospitals to trauma centers by 11.3 hours. The coordinated care communication between on-site responders and in-hospital professionals resulted in decreased hospital costs by $6,505,941 based on a comparison of the net costs of trauma cases before and after telemedicine services were implemented.REF The Boston-based Partners HealthCare telemedicine program reduced readmissions by 51 percent for heart failure patients and 44 percent for those with non–heart failure illnesses.REF

In June 2016, researchers writing for Diabetes Research and Clinical Practice reviewed the outcomes of 9,258 diabetic patients, 4,607 of whom received telemedicine-enhanced care while the remainder received only conventional care. The result: Patients who received telemedicine care reported more successful diabetes management and had lower blood sugar levels than their counterparts who received only in-person care.REF

In April 2018, researchers writing in Critical Care Medicine published a study reviewing the outcomes for high-risk progressive care unit (PCU) patients, those who need more monitoring than is provided in general hospital wards but not as intensive as provided in ICUs. Eight thousand ninety-one patients received telemedicine interventions while 8,000 received only in-person care, and researchers found that patients who received telemedicine care showed decreased mortality rates and lengths of stay.REF

Patients receiving at-home care through New Mexico’s Hospital at Home program at Presbyterian Healthcare Services—which offers some acute care patients the option to receive monitoring at home via telemedicine instead of in the hospital—generated equal or better measurements for each clinical outcome compared to patients residing at hospital facilities. Patients in the program also reported higher satisfaction compared to those who received in-person care.REF

Telemedicine also improves coordinated care by using patient data to generate information for physicians in real time. For example, at Beaumont Hospital in Michigan, a new telemedicine tool uses data from EHRs to display updated information about ICU patients on monitors outside their rooms. Using this tool, medical staff can make quick decisions based on direct visualizations without wasting time searching through records to find critical patient data.REF

Expanded Provider Networks. The educational, professional, and research isolation characteristic of rural medical practice no longer has to be a barrier for today’s physicians because of telemedicine’s collaborative and educational opportunities.REF By allowing remote access to continuing education, physicians can stay current on cutting-edge case studies and discoveries.

Potentially, telemedicine also offers physicians an off-ramp from today’s overregulated, hospital-dominated health care marketplace. Doctors can form and lead Internet-based health care companies,REF exchange their skills and knowledge to generate more economic opportunities, and foster a greater number of patient–physician relationships online.REF

Government regulatory pressures to use more health information technology, coupled with Obamacare’s reporting and billing rules, have driven many independent physicians out of business. According to the Physicians Foundation, only 33 percent of surveyed physicians identified as “independent practice owners or partners” in 2016, compared to 48.5 percent in 2012.REF A recent RAND Corporation study found that individual physician practices are “merging with other physician practices or aligning with or becoming owned by hospitals…to enhance practices’ ability to make the capital investments required to succeed in certain alternative payment models (especially investments in computers and data infrastructure), to negotiate contracts with health plans (including which performance measures and targets would be included), and to gain a sense of ‘safety in numbers.’”REF

With today’s greater hospital consolidation and a high level of merger and acquisition activity, including hospital buyouts of physician groups, fewer independent medical practices exist today than in previous decades. Meanwhile, insurance companies have been able to cherry-pick physicians for inclusion in their networks “based on the cost of the care that was ordered for their patients…not quality of care, not outcomes, not patient wellbeing or satisfaction.”REF

Telemedicine platforms can offer a lifeboat to individual physicians and groups of physicians squeezed out of health care by provider networks. In fact, telemedicine may enable “small physician practices [to] be better prepared to participate and succeed in new payment and delivery models” by facilitating flexible staffing models.REF One such success story is a 16-physician group in Columbia, Maryland, that expanded its practice beginning in 2015 by offering telemedicine services to students in Howard County schools.REF

Finally, telemedicine also allows U.S. physicians to export their skills to other countries. For example, UCLA Health System’s Center for Telepathology and Digital Pathology collaborates with six hospitals throughout China to assess the biopsies of Chinese patients.REF

Reduced Costs for Payers and Patients. In 2018, a study found that the average in-person physician office visit costs $125 while a standard telemedicine visit costs around $45.REF

One clinical advantage of telemedicine is its application for pre-operative and post-operative consultations, eliminating the hassle of transportation for patients.REF It can also streamline in-person visits by allowing patients to complete pre-visit paperwork and evaluations online.REF

Telemedicine can reduce unnecessary ER visits. The average ER visit costs roughly $1,200.REF Analyzing the insurance claims of 6.5 million ER visits, Truven Health Analytics found that a stunning 71 percent of these visits were unnecessary and avoidable.REF A recent study conducted in Houston showed that pre-hospital telemedicine consultations reduced ER visits by 6.7 percent.REF Thus, telemedicine has the potential to reduce avoidable ER visits, provide more appropriate care, and free intensive resources for the patients who need them most.

Telemedicine can reduce employee and student absenteeism. Writing in the journal Pediatrics, researchers found that school-based telemedicine utilizing both live and store-and-forward modalities could reduce student absences by 63 percent, while 91 percent of consultations enabled participating children’s parents to stay at work.REF

Appointment cancellations and “no-shows” cost an estimated $150 billion each year.REF Telemedicine can reverse that dynamic. For pediatric telemedicine consultations, for example, the no-show rate of rural patients is nearly zero percent, compared to the 30 percent reported for in-person consultations that require patient travel.REF

The Congressional Budget Office (CBO) noted that if telemedicine is implemented to prevent the use of more expensive services, it has the potential to reduce federal health care spending; however, the CBO also noted that if telemedicine is used in addition to traditional care services, it will likely increase spending.REF Therefore, the implementation of telemedicine must strategically balance cost and coverage to realize its benefits.

Key Policy Actions in Telemedicine

Congress originally supported telemedicine as a delivery model to expand health care access for rural Americans. In 1994, Congress established the federal Office of Rural Health Policy’s Rural Telemedicine Grant program to allocate funding for the creation of pilot projects in remote communities.REF By August 1996, Congress enacted privacy provisions governing the transmission of patient data, necessitating its encryption, in the Health Insurance Portability and Accountability Act (HIPAA).REF The Health Information Technology for Economic and Clinical Health (HITECH) Act of 2009 incentivized providers to use certified EHRs in managing patient data.REF

In 2014, the Federation of State Medical Boards finalized the Interstate Medical Licensure Compact to offer a streamlined pathway for physicians to obtain out-of-state licensure. The compact enables doctors to practice and transmit patient data across state lines. Today, 24 states and Guam have adopted the compact.REF Additionally, each U.S. state, minus Connecticut and Massachusetts, updated its telemedicine laws in 2017 to reflect new regulatory strategies for the thriving phenomenon, with a handful removing geographic restrictions on the expansion of telemedicine for home-based care.REF

Meanwhile, Congress enacted the Medicare Access & CHIP Reauthorization Act of 2015 (MACRA), which established the Medicare Quality Payment Program (QPP). After MACRA was enacted, the Centers for Medicare and Medicaid Services (CMS) proposed a rule that “include[d] telehealth services in the definition of patient-facing encounters” for Medicare billing purposes and that included telemedicine in the list of clinical activities that could increase a physician’s score under the newly proposed Merit-Based Incentive Payment System (MIPS).REF Under the 2018 QPP Final Rule, which updates the QPP outlined in MACRA, the CMS proposed new telemedicine Current Procedural Terminology (CPT) codes and RPM reimbursement.REF

Enacting the 21st Century Cures Act in 2016, Congress ordered the Medicare Payment Advisory Commission (MedPAC) to report on telehealth reimbursement from both Medicare and private insurers, and to show how Medicare could match private insurers in telehealth offerings.REF The 2018 MedPAC report urged the CMS to cautiously expand telehealth services, focusing on those that reduce costs, increase access, and deliver high-quality care.REF

On October 31, 2018, the CMS released a separate Final Rule for the 2019 Home Health Prospective Payment (HPPS) System that allows home health agencies to bill Medicare for remote patient monitoring.REF The CMS subsequently issued the Final Rule for the 2019 Medicare Physician Fee Schedule and QPP, outlining three new CPT codes that will be available for telemedicine billing in January 2019.REF

In response to the Bipartisan Budget Act (BBA) of 2018, which promotes the expansion of “additional telehealth benefits” in Medicare Advantage (MA) plans in 2020,REF the CMS proposed that MA patients should be able to access telehealth services with the touch of a screen, outside of previously designated locations.REF

Telemedicine and the Opioid Crisis. Telemedicine has also emerged as a tool in combatting the opioid crisis. In September 2017, the Health Resources and Services Administration awarded nearly $3.3 million to the Rural Health Opioid Program and the Substance Abuse Treatment Telehealth Network Grant Program to “improve access to substance abuse treatment in rural, frontier, and underserved communities.”REF In 2018, the Health and Human Services Department’s Substance Abuse and Mental Health Services Administration allocated more than $50 million in grants, partly to implement telemedicine systems to reach remote patients, for tribal reservation areas.REF

The SUPPORT for Patients and Communities Act, passed by the House in October 2018, expedites Medicare reimbursement for telemedicine services rendered to patients with opioid-addiction-related afflictions. It also creates a telemedicine training program on substance-abuse-related care for rural and remote providers and eliminates the “remote location” requirementREF for reimbursement of telemedicine services for Medicare beneficiaries being treated for substance abuse.REF

Removing Other Barriers to Telemedicine

Although telemedicine is becoming popular, it is still a small part of American health care. In recent years, federal and state telemedicine policy changes have surfaced with greater frequency; however, many existing policies remain barriers to patient access to telemedicine.

As a guiding principle, federal and state government efforts should focus on leveling the playing field to allow a competitive marketplace to emerge between health care services delivered in person and services delivered through telemedicine. The state of Missouri is one example of progress in this area. Missouri’s telemedicine law “instructs the Department of Social Services to reimburse health care providers for telehealth services rendered under the same standard of care as in-person services.”REF

Policymakers can improve current policies and promote competition in health care by assessing potential policy barriers in the following areas:

• Statutory definitions. The definition of telemedicine varies widely from state to state and from licensure board to licensure board. In Wyoming, for example, each professional board can create its own definition for the term “telehealth.”REF This is not only a problem for in-state practitioners and patients, it also imposes limitations on out-of-state practitioners who can provide telemedicine for the state’s rural citizens. States should ensure that the definitions surrounding telemedicine are current and broad enough to facilitate innovation while simultaneously protecting patients from unsafe or inadequate services.REF
• Reimbursement policy. Medicare and Medicaid reimbursement policies continue to present barriers to telemedicine. At the state level, Medicaid reimbursement policies vary across specialties and modalities and are often location-specific. Although Medicare has recently expanded its telemedicine benefits, its offerings are limited. Furthermore, patchwork reimbursement policies have hindered physician adoption of telemedicine because its reimbursement has historically been limited to select groups of Medicare enrollees, thereby complicating day-to-day operations for physicians who see both telemedicine-eligible and ineligible patients.

To address these issues, policymakers could support bundling telemedicine activities in current CPT codes instead of proposing additional codes.REF This would reduce billing and coding burdens and give doctors the flexibility to determine which telemedicine options are appropriate for an individual patient throughout the duration of treatment.

• Licensure policies. The limitation on licensing across state lines is often a barrier for physicians and other providers. State policymakers should consider ways to ease licensure rules to facilitate and accommodate telemedicine providers from other states. One solution is for states to accept the laws of a given physician’s state for governing that physician’s practice of telemedicine.REF This would eliminate the need for a physician to obtain a second license to offer the same form of telemedicine practiced in state to a patient located out of state.REF

State officials also need to reduce or eliminate the impact of restrictive licensure practices. Such licensure restrictions aggravate the shortage of physicians and specialists, particularly in rural areas.REF While only 9 percent of physicians practice on site in rural communities, the number of nurse practitioners who provide on-site care services for rural populations increased from 17.6 percent in 2008 to 25.2 percent in 2016.REF State officials need to examine their scope of laws to tap into this cohort of professional talent that can facilitate telemedicine care as telepresenters at a patient’s location.

• Tax policy. Some federal tax rules hinder the adoption and use of telemedicine services. High deductible health plans (HDHP) and health savings accounts (HSAs) are two specific areas where tax policy is not reconcilable with telemedicine expansion. For example, “preventive care” benefits are typically excluded from deductibles for HSA plans; yet, telemedicine services that “provide free or reduced-cost medical benefits before the HDHP deductible is satisfied” are typically not considered preventative care and may also be considered “disqualifying coverage.”REF Likewise, if an employer partially covers a telemedicine visit before meeting the HDHP deductible, the coverage is also disqualified.REF

Federal tax law does not include in its definition of a “patient” a remote person receiving medical care via telecommunications tools.REF This definition excludes telemedicine patients from tax rules governing medical expenses. As such, nonprofit hospitals and health systems could be liable for unrelated business taxable income when providing telemedicine services.REF

Congress could revise tax rules to enable telemedicine to qualify for these tax benefits. One solution could be to revise HSA requirements by using a flexible standard, such as one based on actuarial value. This innovative approach can grant insurance carriers the freedom to design more patient-centered plans based on targeted demographic needs and market demands.REF

Conclusion

Telemedicine has the potential to construct cutting-edge health care delivery with the patient at its center. Growing interest among patients, providers, and payers—most notably, employers—has positioned telemedicine for widespread adoption. Today, hospitals are using telemedicine in their delivery models, and medical professionals are integrating its practice into their curriculums and standards. Each year, more patients in both rural and urban areas are turning to telemedicine for health consultations.

An increasing number of telemedicine programs has demonstrated the capacity for expanded access for rural and underserved areas, as well as offering those in urban settings more convenient care options. Telemedicine also provides a framework to better coordinate care between providers and more competently manage chronic conditions. Moreover, it can expand networks of providers, not only for patients but also for medical professionals. When implemented in a cost-effective manner, telemedicine has the added benefit of reducing health care expenses.

Policymakers have made progress in removing regulatory and statutory barriers to allow telemedicine to flourish in a competitive system; however, policymakers at the federal and state levels should review policies around telemedicine definitions, health care reimbursement, physician licensure, and tax.REF By freeing the health care system to adapt to patient choices and needs through telemedicine, policymakers can advance less-expensive, more sustainable health care delivery with access for all Americans.

—Stephanie J. Zawada is the fall 2018 Graduate Fellow in Health Policy in Domestic Policy Studies, of the Institute for Family, Community, and Opportunity, at The Heritage Foundation.