The Difference in Practice Expense Costs Between Telehealth and In-Office Care Could Serve as the Basis for Differential Reimbursement Structures

Introduction

After nearly three decades of promise, it has taken a global pandemic to demonstrate the value of telemedicine. Despite the promise and the ongoing development, until recently it was relegated to patients residing in Center for Medicare and Medicaid Services (CMS)-designated health professions shortage areas, where Medicare provided reimbursement support for traditional evaluation and management services, delivered in these settings. ¹ Only recently has telemedicine begun to make inroads as a population health management strategy. Population health managers have looked at it as a utilization management tool, but as value-based payments have struggled to gain widespread use, so has telehealth in this context. ²

At the beginning of the COVID-19 global pandemic, CMS and many private insurers temporarily expanded coverage for telehealth services nationwide, to promote physical distancing guidelines while still allowing patients to receive necessary and timely care. ³ Before the pandemic, the coverage for Medicaid telehealth services differed from state to state, and coverage for Medicare telehealth services was limited geographically as noted earlier. Similarly, the coverage for telehealth services among private insurers varied from insurer to insurer and state to state. ⁴

As we begin to think about what life will look like post-COVID, many can agree that the continued demand and expansion of telehealth services is worthwhile. Patients have seen how telehealth can improve access to resourced services and, in some cases, telemedicine provides not only an acceptable option but potentially a preferred option for ongoing care monitoring and observation of patient behavior in their familiar surroundings. In addition, some administrators think that the use of telehealth visits can help optimize patient traffic in brick and mortar settings and lead to more efficient care delivery. ⁵

Payers have met this general enthusiasm with caution, wary that the increased access and convenience afforded by telemedicine will lead to increased costs. One manifestation of this anxiety is the national debate on telemedicine payment parity. Payers argue that telehealth should be compensated at a lower rate, but providers feel that care interactions should be compensated at the same rate whether in person or virtual. ⁶

Since the introduction of the Resource-Based Relative Value Scale ⁷ as a tool for determining reimbursement for work performed by a physician, relative value units (RVUs) have been calculated using three criteria: (1) physician work (time spent, complexity of medical decision making), (2) practice expense, and (3) malpractice expense. We propose that the value of any time spent or medical decision making in a virtual encounter is the same as for an in-person encounter. There is no evidence to date that the malpractice expense for telehealth is different than for in-person care. In this article, we explore the possibility that there may be a difference in the practice expense RVU (peRVU) for an in-person visit and the peRVU for a virtual visit. There is recent precedent for more focus on medical decision making as a yardstick for reimbursement as CMS changed documentation requirements for evaluation and management services as of January 1, 2021. ⁸

The goal for this analysis was to identify the change in total RVUs when the peRVU is recalculated using inputs specific to conducting a virtual visit. Our final RVU calculation assumes that the physician work, complexity of medical decision making, and malpractice expense is the same.

We chose to focus on the use case of virtual video visits because of the recent rapid growth of this mode of care delivery. It is now the dominant form of telemedicine in the marketplace. We recognize that there are other equally compelling telehealth care delivery models (remote patient monitoring, asynchronous visits, chatbots, etc.) but for the sake of purity of analysis, we chose to focus on a scaled virtual visits scenario.

Methods

peRVU is defined as the cost to operate a medical practice and is related to the general overhead expenses of the practice. To better understand all the inputs that go into completing a virtual visit, we gathered information from individuals involved in the day-to-day operations of telehealth services at Massachusetts General Hospital. We based our analysis on a theoretical practice with a high volume of virtual visits per year, before COVID.

Initially we sought to account for all direct and indirect costs. We defined direct costs as costs that can be directly assigned to carrying out a virtual visit, for example, the actual supplies, equipment, and staff time (labor) used. There are no medical supply costs associated with a virtual visit. In comparison with an in-person visit, a virtual visit does not require items such as examination room paper and tongue depressors.

We defined indirect costs as the costs that are needed to carry out a virtual visit but cannot be directly accounted for. Examples of indirect costs are practice overhead, billing fees, and technology support costs. Practice overhead includes central management costs such as accounting, payroll, human resources, contracting, electronic health record (EHR), reporting, and central initiatives to develop programs to improve patient access, clinical safety and quality, customer service, and so on. Taking all the direct and indirect costs into account, we recalculated the peRVU using the methodology developed by the RVS Update Committee. The formulas and assumptions we used are detailed in Appendix A1

Results

For this analysis we assumed this practice has five physicians doing virtual visits, the practice uses a virtual visit platform that they pay a yearly fee for per provider. The practice also employs one patient service coordinator to handle the logistics of the virtual visits and interface with patients.

The final peRVU for a 99213 virtual visit is 0.59. The in-office peRVU for a 99213 visit is 1.05. For current procedural terminology (CPT) code 99213 the total RVU for a virtual visit would be 1.62. The in-office RVU for CPT code 99213 is 2.09. The Difference is −0.46 RVU. This would support the argument that when operating at scale, telehealth visits require fewer practice expense resources than in-person visits.

Discussion

From our analysis, we found that the work and resources associated with coordinating virtual visits are still significant. As we were conducting this analysis, we continued to unveil the complexity and work that is necessary to conduct virtual visits. The analysis presented in this article has been simplified. Another alternative to full payer parity would be legislation requiring reimbursement of telehealth services using a modified physician fee schedule that recalculates RVUs for telehealth services. Using the findings from our analysis, this would mean that if reimbursement per RVU was $45, then the reimbursement amount for code 99213 conducted in person would be 2.09 × $45 = $94.05 and the reimbursement for code 99213 through virtual visit would be 1.63 × $45 = $73.35.

In addition, we believe that there are other practice expenses that must be accounted for such as the cost of outfitting a home office and the information technology costs of extending secure access to an EHR. In our current environment, it is likely that physicians will bear the expense of licensure costs in neighboring states and we did not include this expense in our model.

The COVID-19 pandemic has brought telehealth into the consciousness of patients and providers around the world. There is widespread agreement that having this second channel for health care delivery is better for our patients. The integration of telehealth into care delivery has also acted as a springboard for reimagining how we deliver care, freeing us from the restrictions of time and place. We must equally reimagine provider reimbursement to take advantage of this opportunity.

We recognize that this analysis was done using inputs specific to our institution and that the outcome will be different for everyone. Our analysis is meant to be a starting point as we continue to consider the many complex factors involved with creating telehealth policies that improve health outcomes, increase access to care, and improve cost-effectiveness and value.