Telemedicine can be a means of providing high quality care in a way that increases access for patients and reach for providers while lowering cost for all parties involved. Although this seems like a winning proposition, telehealth is still in its infancy. Both regulators and payors acknowledge the potential cost savings and enhanced patient outcomes that may result from the expansion of telehealth; but they also acknowledge—and are attempting to control—an area that is ripe for fraud and abuse. As business models continue to develop in creative ways, providers must be wary of any arrangement that appears too good to be true.

Many models evolving in the telemedicine space are funded through marketing efforts on behalf of ancillary providers. While there are compliant marketing models to support and expand telemedicine offerings, the most common models emerging in the past several years are not. In these models, ancillary providers such as pharmacies and durable medical equipment companies are engaging marketers to shepherd patients to telemedicine providers, with the goal of receiving a prescription for medication or DME order as a result. The biggest source of concern in this format? The marketers are typically paying the telehealth companies for each patient they deliver, and the company in turn compensates the provider for his or her service in conducting the encounter. In short, the ancillary provider is reimbursing the physician.

Setting aside the significant regulatory violations such a model can produce, the source of payment for a telehealth encounter can invalidate the bona fide relationship between the physician and patient, thereby impairing the legitimacy of any resulting ancillary order. In the model described above, these orders are being submitted to the ancillary providers, who subsequently bill insurers for the ancillary products. Insurers, with greater frequency, have turned to analyzing and comparing health insurance claims data with pharmacy benefits claims data. When an insurer identifies a claim for an ancillary service, but finds there is no corresponding claim for a physician visit to generate the applicable prescription, the payor will seek recoupment of the paid claim.

In the context of Medicare beneficiaries, the risk is particularly high. We have seen many instances in which reimbursement for pharmaceutical or DME products is not only recouped, but the physician is investigated. In addition to board discipline, physicians are subject to audit and termination by payors as a result of failing to bill for telemedicine encounters. In certain circumstances, we have also seen physicians’ ordering privileges and/or provider status terminated by Medicare, citing to the noncompliance in the physician’s failure to bill for services to Medicare beneficiaries.

Participating in a cash-only arrangement does not remove the hurdles established by state boards or insurers. For physicians aiming to expand their scope of services by participating in a telemedicine arrangement, an understanding of the impact the arrangement may have on the physician’s primary practice is critical. Many telemedicine companies do not accept Medicare beneficiaries, or only accept these patients on a cash basis, in an effort to circumvent applicable billing guidelines and limitations. However, physicians treating Medicare patients are required to bill for services provided to Medicare beneficiaries if services have been rendered, irrespective of whether such physicians have accepted Medicare assignment. Failure to do so can result in revocation of the practitioner’s Medicare provider status. Despite accepting cash-only for the virtual encounter, the implications of an improper telemedicine encounter illustrate the failure of carve outs of federal reimbursement to protect against regulatory scrutiny.

Telemedicine encounters must be conducted in conformity with applicable state law and payor requirements, in accordance with the applicable standard of care, and billed to the patient’s insurer. Telehealth encounters that are reimbursed by any party other than the patient and/or the patient’s insurer will result in an invalid physician-patient relationship, an illegitimate ancillary claim, and discipline for both the physician and the ancillary provider.

Contact Frier Levitt for assistance in developing a sustainable telemedicine model.