Rising Virtual Doctor Visit Rates Unsettle Employers, Insurers

Insurers and telehealth companies are tussling over rates for care delivered online or over the phone, but a shift in how doctors and other providers are reimbursed may ultimately help lower costs for patients, employers, and insurers.

The Covid-19 pandemic prompted the Department of Health and Human Services to loosen restrictions on the use of telehealth, and the agency raised the rate at which it reimburses many telehealth services covered by Medicare to match higher in-person rates—at least temporarily. Many insurers have followed suit for commercial rates.

Those decisions spurred concerns the higher rates could shatter the promise of cost savings long associated with telehealth. Telehealth has boomed during the pandemic, providing access to medical providers that patients otherwise wouldn’t have had.

OptumCare, UnitedHealth Group’s physician service, conducted more than 900,000 telehealth visits since the Covid-19 crisis took hold, according to data supplied by the company. Throughout 2019, the company held only 31,000 such visits.

Telemedicine visits are projected to make up 30% to 50% of primary care visits in coming years, Sam Glick, a partner with the health and life sciences practice of management consulting firm Oliver Wyman, said.

And the potential for savings is significant. Oliver Wyman estimates it costs $30 to $50 to deliver a primary care telehealth visit, while in-person visits can cost twice that.

“Prices should adjust to more fairly reflect the cost structure because the reality is it doesn’t cost as much to deliver a telemedicine visit,” Glick said. The physical overhead is typically not as expensive for telehealth visits as in-person visits because fewer exam rooms, waiting rooms, and staff are needed, he said.

Employers also worry the greater convenience of telehealth could lead to more unnecessary visits, he said.

Value-Based Care

Insurers and employers say applying the principles of value-based care also has the potential to create cost savings with telehealth. Under that increasingly popular payment method, reimbursements to doctors are based on outcomes for patients rather than each visit or service.

Like many other doctors’ groups, OptumCare receives in-person rates for telehealth services performed by some of its doctors during the public emergency, Daniel Frank, chief medical officer, said.

But for the many of the more than 50,000 physicians working with OptumCare, reimbursements aren’t based on whether the visit takes place virtually or in-person but on set fees per patient, called capitated fees, as well as the outcomes for patients.

That means telehealth visits aren’t more costly for patients or insurers than they would be based on previously lower virtual rates, Frank said.

Holding Onto Higher Rates

The telemedicine industry is making its case for higher rates.

The American Telemedicine Association wants Medicare and Medicaid to cover and reimburse for telehealth the same ways it does for in-person visits.

The association also favors parity in coverage for private insurance. But those health plans should be able to negotiate reimbursement rates based on market conditions and value-based payment models, Kyle Zebley, director of public policy, said.

“There is in effect no difference” between telehealth and in-person care, Zebley said in pushing for greater parity in how tele-visits and in-person care are treated.

Zebley also pointed to investments in innovation for telehealth that aren’t necessary for in-person care. Those investments include internet and electronic infrastructure as well as devices used by patients to monitor conditions such as diabetes, he said.

Concerns About Rising Costs

But employers, who provide health coverage for 180 million Americans, are concerned about rising telehealth costs.

Fifth-three percent of 122 large employers covering 9.2 million people are planning to implement more virtual care in 2021, according to an Aug. 18 survey from the Business Group on Health.

“We are for and in support of payment flexibility,” Ellen Kelsay, the group’s president and CEO, said in a press briefing. That could mean less reimbursement for telehealth in some cases. In other instances, it may mean increased reimbursement “if it’s a better modality for delivery, depending on the situation,” she said.

“We want to be careful that virtual does not overlay additional costs onto already challenging health-care cost infrastructure,” Kelsay said.

“Making sure that these virtual models are deployed in a value-based arrangement is going to be really important, and that it does have underlying impact and benefit to overall outcomes and improvement in those outcomes,” Kelsay said.

Payment Parity a ‘Hot Topic’

Parity in payment rates is “a hot topic” on the Taskforce on Telehealth Policy, Peggy O’Kane, president of the National Committee for Quality Assurance, said.

The task force was formed by a group of private and public health-care organizations to develop long-term recommendations on getting the most benefit from telehealth. It plans to issue those recommendations in early September.

Medical providers that have made telehealth work well “feel like, don’t put any impediments in place for telehealth,” said O’Kane, who is a member of the task force.

“If you want to get to the promise of cost savings, it has to be a little more nuanced than ‘pay the same for a telehealth visit,’” O’Kane said. Virtual medical homes, in which primary care practices deliver care by telehealth, could allow for the kind of quality care that is needed, she said.

However, “payers are appropriately skeptical about having this technology that has the potential to drive better efficiency actually drive up costs,” O’Kane said.

When the public health emergency ends, “That’s where I think payers are probably going to start to re-evaluate telehealth and determine where it makes sense for either some of those payments to stay at parity or to retract back to a lesser amount,” Danielle Showalter, a principal with health-care policy consulting firm Avalere Health, said.

Telehealth groups are developing chronic care management and other services that add value and could command higher rates, she said.

But telehealth still has a long way to go to develop its full potential, Mary Kay O’Neill, a partner in the telehealth management practice of human resource consulting firm Mercer, said.

With the exception of behavioral health, prior to the pandemic, telehealth providers provided mostly one-time, urgent care service, O’Neill said.

“The systems are not set up to manage people over time,” she said.

Telehealth needs to be able to provide ongoing, comprehensive care for patients in the same way the in-person doctors do, she said.