Payor Contracting

How is Telemedicine Changing Healthcare?

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It has now been over a year since COVID-19 led to lockdowns and every industry's adaptation to social distancing requirements. Telemedicine or remote care provided via phone and video conferencing software is a focus among personalized healthcare efforts today and central to planning for tomorrow.Even before COVID-19, however, surveys indicated that American patients would readily adopt telemedicine as part of managing their physical and mental health needs. In 2015, the American Hospital Association published a TrendWatch report stating that 70% of patients are comfortable communicating electronically with care providers, 74% would use telehealth services, and 76% prioritize access to care over human interaction.1Looking toward a post-pandemic world, conversations around telemedicine have shifted towards integration with existing healthcare infrastructure and services. On a panel discussing payor contract negotiations, Patty Whitmarsh, Director of Payer Strategy and Managed Care for Augusta University Health System, stated that AUHS expects continued telemedicine usage beyond Covid-19.She added: "for busy patients... it will likely become a preference."2

What is "Telemedicine"?

In 2010, the World Health Organization (WHO) defined telemedicine as: "The delivery of healthcare services, where distance is a critical factor, by all healthcare professionals using information and communication technologies for the exchange of valid information for diagnosis, treatment and prevention of disease and injuries, research and evaluation, and for the continuing education of healthcare providers, all in the interests of advancing the health of individuals and their communities."3

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Is "Telehealth" Different?

Narrow definitions of telemedicine restrict the term to instances of clinical service delivery (e.g., a video call between a patient and their primary care physician). While used synonymously, telehealth sometimes serves more as an umbrella term to include broader healthcare operations and administration-such as access to patient information, educational resources, pharmaceutical services, and an opportunity to enhance patient engagement strategies. Both the WHO and the American Telemedicine Association (ATA) consider telemedicine and telehealth interchangeable.4

Telemedicine Benefits

Although healthcare providers have been able to leverage telecommunications in the past, continual technological developments have evolved capabilities and possibilities. As medical and information technology becomes more advanced, providers, patients, and payors see more of telemedicine's potential realized:

  • Increased care access and availability - Scheduling and travel present two traditional challenges to patients' access to medical attention and advice. How do providers attend to patients in remote locations? How do patients make appointments if their work schedules or life obligations complicate their availability? Telemedicine helps bridge distances between patient and provider.
  • Preventative efforts vs. reactionary visits - Providers and payors have started seeing the benefit of switching from a patient culture of "visiting when necessary" to ongoing, preventative healthcare. The CDC estimates that 90% of the United States' $3.8 trillion spent on annual healthcare expenses are for patients with chronic and mental health conditions.5
  • Providers can grow- Telemedicine can help providers see more patients and expand their patient base while minimizing growth costs. Without increasing administrative staff, square footage, or overhead, providers have the potential to:
  • Reduce downtime between each patient
  • Offer more flexible hours
  • Answer on-call needs rapidly
  • Treat patients without location limitations
  • Increase patient care satisfaction and decrease their stress (e.g., no wait rooms)
  • Conserve consumables and minimize process iteration (e.g., disinfecting surfaces and sterilizing implements between patients)
  • Expanded medical expertise ?Without geographic restrictions on telemedicine, patients can receive treatment from anywhere (pending the provider's licenses and certifications). Telemedicine also enables experts and specialists to oversee cases, conduct remote procedures robotically, and provide patient education sessions.

While the loudest attention focuses on telemedicine's ability to increase patients' access to healthcare services significantly, providers and payors have started to see the merits as well.

One of Telemedicine's Biggest Challenges-Payor Reimbursement

In the same panel discussion on payor contract negotiations, Patty Witmarsh identified the crux of payor contract challenges: "It's essential that we ensure inclusion of reimbursement for telehealth services in our payer agreements. We need to determine which services best meet patient's needs through telehealth, while ensuring reimbursement is appropriate."6The concern over fair reimbursement for telehealth services is not a new challenge.A 2017 Foley & Lardner survey identified unclear reimbursement as one of the most significant barriers to telemedicine adoption.7 Although the 2019 follow-up report identified improvements with telehealth commercial payor statutes in 42 states and Washington D.C., their variance overpayment parity with in-person care complicates payor reimbursement for providers.

What is Payment Parity?

Payment parity requires private payors to reimburse telemedicine at the same rate as they do for in-person care. As the U.S. healthcare system primarily relies on a combination of private and public payors rather than directly billing patients, a gap between reimbursement amounts leaves providers with revenue shortages.With Covid-19 responses transitioning many patient visits from in-person to telemedicine, the healthcare industry faces a sudden challenge of determining fair reimbursement. Particularly in light of the decrease in routine and non-emergency procedures identified by Whitmarsh, payment parity is critical to ensure providers can keep their doors open during the pandemic.8

State Law Discrepancies for Private payors

The Kaiser Family Foundation (KFF) found that only six states required payment parity for private payors before Covid-19, with four joining since:

  • CA
  • DE
  • GA
  • HI
  • MN
  • NM
  • AZ*
  • CO*
  • KY*
  • NJ*

* States that enacted payment parity after the start of Covid-19.Despite the gap in reimbursements, roughly half of states require by law that state-regulated private plans must cover telemedicine and in-person services the same (i.e., "service parity). Though KFF reports that 16 states have enacted temporary payment parity during the Covid-19 pandemic, measures have focused on emergency response over long-term policy. This discrepancy between payment and service parity leaves providers to manage revenue losses.9

Covid-19 Changes to Medicare & Medicaid Telemedicine Coverage.

Federal and state governments have loosened Medicare and Medicaid's telemedicine restrictions to support minimizing personal contact. The public program's increased access and parity between services and payments have helped pave the way for telehealth growth. Further, the Coronavirus Aid, Relief, and Economic Security (CARES) Act's passing approved allocating $29 million per year to the Telehealth Network Grant Program (TNGP) until 2025.Changes to traditional Medicare include:

  • Reimbursement no longer requires a rural residence for telemedicine coverage.
  • Patients' homes now qualify as "originating sites" from where they can access telemedicine resources.
  • Patients and providers may now conduct telemedicine sessions over smartphones.
  • Telemedicine services no longer require the provider to have treated the patient within the last three years.

States have retained flexibility over Medicaid's telemedicine coverage and reimbursement. However, state laws demonstrated significant coverage variance before Covid-19. For example, all states (and Washington D.C.) provided some degree of telehealth coverage, but over 60% had determined patients at home were ineligible to receive remote fee-for-service care. States have enacted emergency payment and service parity policies, but the future remains uncertain.7

Additional Telemedicine Challenges

While fair reimbursement and payment parity pose some of the biggest challenges to telemedicine's success, additional obstacles range from personal preferences to supporting infrastructure costs:

  • Preference for in-person care - Patients or clinical service providers may strongly prefer in-person visits?Whether they enjoy the interaction or doubt the effectiveness of remote healthcare, some patients and providers will avoid telemedicine.
  • Infrastructure overhaul for providers - Supporting telemedicine requires IT infrastructure. Any new software implementations or additional hardware purchases will require additional investment.
  • Patient technology demands ?Even if healthcare providers set up everything needed to implement telemedicine services, patients must support the technology needs on their end. Suppose some patients do not have the device access to make a call, a reliable internet connection to facilitate it, and (ideally) physical space for privacy. In that case, telemedicine is not an option regardless of a provider's infrastructure investments.
  • Laws and regulations - Any telehealth or virtual care solution must be HIPAA compliant and secure to protect patients' medical data. Through initiatives such as the Interstate Medical Licensure Compact seek to streamline the process, providers likely require additional licenses and certifications to see patients from across state lines or other boundaries.8

The American Hospital Associations TrendWatch report indicates rising comfort levels with telemedicine, and nationwide responses to Covid-19 have shown governments' ability to enforce payment and service parity. Insufficient technology infrastructure may pose the most considerable challenge to telemedicine after payor reimbursement, and grants and other funding opportunities offer assistance.

Navigating Telemedicine Reimbursement

Although telemedicine continues to grow without signs of stopping in the aftermath of Covid-19, healthcare providers must still navigate adoption challenges-notably, payor contract management and negotiation to ensure fair reimbursement and payment parity.If you are a healthcare provider looking to start offering (or expanding) telemedicine services, setting up your personnel and IT resources present enough of a challenge. As the leading solution for managed care consultants for over 25 years, PayrHealth assists providers with services credentialing support to contract negotiation, and more? Contact us today for more information.


  1. American Hospital Association? The Promise of Telehealth For Hospitals, Health Systems and Their Communities, TrendWatch
  2. PMMC Improving payor Contract Negotiations: Managed Care Experts Share How?
  3. World Health Organization Telemedicine: Opportunities and Developments in Member States?
  4. Wicklund, Eric Is There a Difference Between Telemedicine and Telehealth?
  5. CDC Health and Economic Cost of Chronic Disease.
  6. Foley & Lardner LLP 50-State Survey of Telehealth Commercial payor Statutes?
  7. Weigel et al Opportunities and Barriers for Telemedicine in the U.S. During the Covid-19 Emergency and Beyond?
  8. Interstate Medical Licensure Compact A Faster Pathway to Physician Licensure.
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