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Some perils of telemedicine

By John W. Jones, Esq.

Over the past few years, telemedicine has made significant strides both in the provider community and among consumers. This developing area, sometimes referred to as “telehealth services,” includes professional consultations, office and other outpatient visits, psychotherapy, pharmacologic management and other services conducted via an interactive telecommunications system. The benefits of telemedicine are numerous and range from the ability to monitor a patient’s progress remotely to providing high quality of care to a larger segment of the world. Recognizing these benefits, the Joint Commission on Accreditation of Healthcare Organizations recently issued its first official accreditation in the telehealth field.

Telemedicine’s growth, however successful, has been slowed by payment and other legal concerns. Limits on services that qualify for insurance coverage, state licensure laws, potential malpractice liability, and privacy and security concerns are just a few of the issues impacting telemedicine’s growth.


With the exception of teleradiology and telehealth services offered under grant programs, the majority of insurers, including Medicare, only reimburse physicians for medical care that is delivered face-to-face. Industry representatives have been pushing for flexibility and freedom for telehealth services for several years. On November 2, 2001, the Centers for Medicare and Medicaid Services (CMS) issued its final rule regarding the reimbursement of telehealth services under Medicare, Medicaid and the SCHIP Benefits Improvement and Protection Act of 2000 (Act), which went into effect on January 1, 2002. Although the Act expands reimbursable telehealth services, it may not be enough for physicians.


The Act covers telehealth services that are presented from a county outside of a Metropolitan Statistical Area (MSA), an originating site (the site where the patient is being treated) in a federally designated Health Professional Shortage Area (HPSA), or from any entity that participated in a federal telemedicine project that was approved by, or received funding from, the Secretary of Health and Human Services (HHS) as of December 31, 2000.

The Act will be an improvement in less-populated areas. Previously, eligibility for telehealth services covered under Medicare was limited to HPSAs. By covering non-MSAs, the Act increases eligibility for rural areas that may not qualify as an HPSA because they have primary care health care professionals, but which still lack specialists such as cardiologists or pathologists whose services could be obtained through telemedicine. Although the Act has expanded geographic eligibility, it limits coverage in HPSAs by defining “originating sites” as the site where the patient is when the service is provided via a telecommunications system, such as a physician’s or practitioner’s office or a hospital.

Coverage and Payment Conditions

Under previous regulations, Medicare only covered “interactive consults.” CMS interpreted this term very narrowly so that “consults” were limited to a few CPT codes. The Act is much more expansive, covering the use of telecommunications systems for office visits, outpatient visits, psychologic and pharmacologic management, and any additional services specified by the Secretary of HHS.

As a condition to Medicare payment, the Act requires the use of an “interactive telecommunications system” that must allow real-time audio and video communication between the patient and the physician. Accordingly, e-mail systems, telephones, facsimile machines and store and forward technologies, except where traditional health care practice does not require face-to-face interaction – such as radiology – would not meet the requirements of an interactive telecommunications system under the Act.

Medicare Practitioners

Medical professionals who may bill for telehealth services under the Act include physicians, nurse practitioners, physician’s assistants, nurse midwives and specialists. A significant change provided by the Act is that it does not require the use of physician or practitioner telepresenters unless the physician or practitioner determines that it is medically necessary.

Fee-Splitting, Payment Amounts and Facility Fees

The Act eliminates fee-sharing between the consulting physician or practitioner and the referring practitioner. Reimbursement payments to consulting physicians for telehealth services provided via telecommunications systems will be equal to the reimbursement for the same services provided without the use of a telecommunications system. Payment to the originating site is the lesser of the actual charge or a $20 facility fee.


Generally, a physician must be licensed in the state in which she practices. For example, to treat patients in Pennsylvania, physicians must satisfy certain license requirements. Several states have passed legislation regarding licensure requirements for the practice of telemedicine. Unfortunately, there is not much consistency among the states. Some states require a license to be obtained in each state the physician provides telemedicine services and others issue special licenses to out-of-state physicians to practice telemedicine in their state. These requirements can significantly limit the networking capability of a telemedicine system. A New York specialist, for example, who wants to treat patients in the rural areas of Pennsylvania via telemedicine will have to comply with these requirements or fall within an exception. If compliance is too burdensome, the specialist may decide to opt out of providing the service.


The risk of malpractice liability may be greater with telemedicine. Claims could arise from a physician’s diagnosis and treatment based on incomplete or flawed data and transmission, adverse patient outcomes resulting from use of the telemedicine system and use of outdated equipment. Further complicating matters is the issue of where a malpractice suit may be brought. A patient can choose whether the referring physician’s or consulting physician’s state would be the most advantageous and could result in the greatest award. All of this coupled with the uncertainty as to the applicable standard of care could limit telemedicine use.

Privacy and Security

As of April 14, 2003, covered entities, including health care providers, have certain privacy and security obligations under the privacy regulations of the Health Insurance Portability and Accountability Act of 1996 with respect to protected health information. The privacy regulations impose certain requirements on a health care provider’s use or disclosure of protected health information. Additionally, the Security Standards, which for health care providers have a compliance date of April 20, 2005, require providers to implement certain administrative, physical and technical safeguards to protect electronic protected health information. Delivering care through a telemedicine system and transferring patient data electronically would certainly implicate the Privacy Regulations and Security Standards. In an era when medical information can be accessed by unauthorized persons or “hackers,” perfect security is non-existent, and misdirected transmissions occur with some frequency, the transmission and storage of this information in telemedicine creates significant concerns for physicians under state and federal law.

Telemedicine has proven to have many benefits, most importantly providing greater access to care. Whether telemedicine is ultimately utilized by the majority of physicians to deliver care will depend, in large part, on payment. Although the Act expands opportunities for medical professionals to provide telehealth services, there still may not be enough incentives to encourage the use of these technologies. Strict state licensure requirements, potential malpractice claims and privacy and security concerns may also contribute to slow growth of telemedicine.

John W. Jones, Esq. is a member of the Health Care Services Group at Pepper Hamilton LLP in Philadelphia, Pa.

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