Telehealth under alternative payment models

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By Susan Philip | 23 November 2015

Telehealth, as a modality of delivering healthcare services, is growing in terms of acceptance and adoption. There are a few key drivers for this dynamic: (1) consumer demand for convenient access to care; (2) availability of lower-cost telehealth technologies; (3) clinician comfort and willingness to provide certain services remotely; and (4) evolving payment models that seek to incentivize value and better population health.

Evolving payment models reflect the need to mitigate perverse incentives for the unnecessary healthcare utilization, waste, and inefficiencies that are inherent in a volume-based payment system, such as fee-for-service Medicare. Both private and public sector purchasers, such as Medicare, state Medicaid programs, and employers, are in the midst of testing and scaling alternative value-based models. Under these payment models, there are opportunities for telehealth adoption to the extent it encourages efficiencies in the system. Examples include:

Next Generation Accountable Care Organization (ACO) initiative: Allows participants to take on greater financial risk, as well as potential savings, than those in current Medicare ACO initiatives. Next Generation ACOs agree to be accountable for beneficiaries assigned to them and meet certain quality targets.

  • Implications for telehealth: Next Generation ACOs will have the flexibility to waive “originating site” coverage restrictions as well as the requirement that beneficiares be located in a rural area for telehealth services. For example, Medicare's originating site restrictions require that beneficiaries be located at specific settings, such as a rural health center, critical access hospital or a physician's office, when receiving telehealth services. The telehealth waiver gives Next Generation ACOs the flexibility to allow patients to be at other settings, including their home. For the Medicare beneficiary, this opens up new ways of engaging with his/her care team that would not require travel.

Medicare Advantage Value-Based Insurance Design (VBID) Model: Beginning January 1, 2017, this model allows Medicare Advantage (MA) plans and Medicare Part D plans in seven states1 to test various structures of enrollee cost-sharing and plan design elements to encourage use of high-value clinical services. MA-VBID will be able to design benefits for enrollees in certain clinical categories: diabetes, congestive heart failure, chronic obstructive pulmonary disease (COPD), past stroke, hypertension, coronary artery disease, mood disorders, and combinations of these categories.2  

  • Implications for telehealth: Medicare Advantage plans already have the flexibility to provide coverage for telehealth services. Certain MA plans provide remote monitoring as part of chronic condition management for select conditions, such as heart failure.3 MA-VBID plans, opting to use plan design elements to encourage enrollee participation in chronic condition management programs, have the opportunity to leverage telehealth technologies to optimize engagement in those programs. For example, remote monitoring of patients with diabetes includes electronic transmission of finger stick glucose and blood pressure readings. Patients have the data combined with web-based or mobile-device-based tools (such as mHealth) to take practical steps to engage in their own care and manage their HbA1c levels. Readings from glucometers or blood pressure devices that have cause for alarm can raise flags for the care managers to contact the patient.

State Medicaid alternative payment models: A number of states are implementing alternative payment models for their Medicaid populations.

  • Implications for telehealth: New Hampshire states in its Section 1115 Demonstration Waiver application that it will consider piloting telehealth delivery models to improve care coordination between behavioral and medical care. Illinois proposed using Waiver funds to develop a statewide telehealth specialty care network to improve access to behavioral health and specialty care services in rural areas.4 California’s 1115 Waiver renewal application considers telehealth as a tool for Medi-Cal managed care organizations to facilitate integration of behavioral healthcare services. Several states, such as California, Illinois, New Mexico, and Texas are using payment flexibility to improve access via telehealth to residents in rural communities.

Commercial ACOs: There are a variety of commercial ACO arrangements organizing health systems, physicians, and payer partners, to align payments incentives to the care delivered to a specific population.

  • Implications for telehealth: As with Medicare ACOs, commercial ACOs also have opportunity to leverage telehealth technologies to engage patients in self-management, improve care coordination, and reduce the risk of unnecessary, higher-cost services, such as hospitalization or emergency room use. According to a recent survey of ACOs around the country, about 20% are using telehealth services.5 A common use case is allowing patients that have complex, multiple chronic conditions who are enrolled in a care management program to have virtual visits with a nurse care manager through a mobile device. The goal is to provide timely information to patients to better care for themselves, and to deliver more efficient interventions that prevent exacerbations and further complications of their conditions.

Evaluations of telehealth solutions: Calibrating expectations

Cost savings and efficiency gains under alternative payment models will be driven by delivery system transformation and successful population health management initiatives. Telehealth has the potential to boost the impact of population health management initiatives while improving access and convenience of healthcare delivery.

Telehealth’s potential is not lost on investors and employers. In 2014, companies focused on telehealth technologies received about $285 million in venture capital funding, a substantial increase from less than $100 million in 2013.6 A recent employer survey indicated that about a third of employers expect to offer or are considering offering telemedicine consultations to employees as a low-cost alternative to emergency room or physician office visits for nonemergency health issues.7 The same survey found that telemedicine has the potential to deliver close to $6 billion in savings to U.S. companies.

Such high expectations must be calibrated. To conduct appropriate ROI evaluations, telehealth solutions and programs should be designed to consider the purpose of the solution. In general, we think of telehealth solutions for one of three primary purposes: improve access to specialty care, support care management, or provider nonemergency acute care services.

Purpose Improve access to specialty care Support care management Provide nonemergency, acute care

Patient at rural health center has video visit with remote ophthalmologist

Patient has in-home video visit with remote psychiatrist

Patient with CHF uses in-home scale, blood pressure monitor, and pulse oximeter that feeds data to remote care manager

Diabetic patient uses glucometer that sends data feeds to care manager

Employee with UTI has a video visit with a physician and receives prescription for ciprofloxacin

Parent with child having acute sinusitis has video visit with nurse practitioner and receives prescription for fluticasone and OTC remedies

Evaluating ROI
  • Who are the target population and who are the users?
  • What are utilization, cost of telehealth visits and for what specialty services and health conditions?
  • What are the comparative cost of services if patients were to travel for an in-person visit?
  • What are the costs to the originating site (if applicable) and remote provider site?
  • How has total utilization and PMPM cost for a given population changed following implementation of the telehealth program, adjusting for annual trends?
  • Consider other measures: nonemergency transportation costs; missed days of work/school; patient satisfaction; provider satisfaction.
  • Who are the target population and who are the users?
  • What are utilization, cost of telehealth visits and for what specialty services and health conditions?
  • How does the telehealth solution support the care management program functions?
  • How has total utilization and PMPM cost changed following implementation of the care management program, for the target population, adjusting for annual trends?
  • Consider other measures: missed days of work/school; patient satisfaction; provider satisfaction.
  • Who are the target population and who are the users?
  • What are utilization, cost of telehealth visits and for what specialty services and health conditions?
  • Does telehealth substitute for other services (urgent care, physician office, ER)? What were the total cost of those substitute services?
  • Are there follow-up, in-person visits? Are those resulting from unresolved issues from the telehealth visit?
  • How has total utilization and PMPM cost changed following implementation of the telehealth program, adjusting for annual trends?
  • Consider other measures: missed days of work/school; patient satisfaction; provider satisfaction.

For example, a telehealth program designed to increase access to behavioral health should be expected to increase the total use and costs of behavioral healthcare services delivered to a given population. However a robust evaluation of the potential return on investment should consider the total cost of care for healthcare services provided to a given population, including those which may have been avoided.

Studies intended to assess the impact of telehealth solutions designed to support care management functions, such as post-discharge mobile device tools, wearables, or devices for home monitoring, should consider the chronic condition or care management program these technologies are intended to support. Robust evaluations should consider the care management program’s effects on the utilization and costs associated with the target population.

By design, telehealth programs intended to provide convenient access to a limited set of nonemergency, acute care services can be expected to increase the use of those services. Vendors such as Teledoc, American Well, or Doctors on Demand typically offer 24/7 video visits for common symptoms that may require consultation with an advance care practitioner or a physician. Examples include UTIs, skin issues and rashes, diarrhea and vomiting, and cold and flu symptoms such as sinusitis, or bronchitis. These services are not designed to substitute for an ongoing relationship with patients’ primary care providers but rather to provide an alternative to urgent care or ER visits for nonemergency conditions. Robust evaluations of the potential return on investment should consider whether services merely drive up total use and cost of healthcare for a given population, or whether the telehealth services successfully replace other, more costly services such as emergency care or urgent care visits.

Health insurers, purchasers, and investors will look to properly designed evaluations to assess return on investment and metrics related to utilization, costs, access, and quality of care.

1Arizona, Indiana, Iowa, Massachusetts, Oregon, Pennsylvania, and Tennessee.

2Centers for Medicare and Medicaid Services (October 9, 2015). Medicare Advantage Value-Based Insurance Design Model: Request for Applications. Center for Medicare and Medicaid Innovation.

3Maeng, D.D., et al. (2014). Can telemonitoring reduce hospitalization and cost of care? A health plan’s experience in managing patients with heart failure. Population Health Management. DOI: 10.1089/pop.2013.0107.

4Illinois Department of Healthcare and Family Services (June 4, 2014). The Path to Transformation: Illinois 1115 Waiver Proposal.

5eHealth Initiatives and Premier, Inc. (October 9, 2015). 2015 ACO Survey Results Webinar.

6Wang, T. & Gandi, M. (January 2015). Digital Health Funding: 2014 Year in Review. Rock Health.

7National Business Group on Health/Towers Watson. (2014). The New Health Care Imperative: Driving Performance, Connecting to Value: Employers Survey on Purchasing Value in Health Care.