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HCFA's pay policy hampering telemedicine programs

Critics say that restrictive Medicare reimbursements are causing some programs to scale back efforts

From the February 2000 ACP–ASIM Observer, copyright 2000 by the American College of Physicians–American Society of Internal Medicine.

By Edward Martin

When HCFA announced that it would start reimbursing physicians for certain types of telemedicine procedures in April of last year, many predicted that 1999 was going to be a big year for telemedicine. HCFA's new payment policy would shatter one of telemedicine's main barriers—reimbursement—and give the technology a boost.

Nearly a year after HCFA introduced its new payment policy, however, telemedicine programs around the country are worse off than ever. Hospitals have curtailed their efforts or are shelving programs altogether. And a big part of the problem, experts say, is the HCFA reimbursement policy that was expected to convince hospitals and physicians to use telemedicine.

Telemedicine's most recent troubles began with the Balanced Budget Act of 1997, which directed HCFA to pay for the technology in areas with a shortage of health professionals. While HCFA did begin reimbursing physicians and hospitals for telemedicine procedures last April, critics say that the agency has interpreted a poorly worded statute in ways that do not live up to the legislation's true intent.

Narrow definition

One critical issue is BBA language authorizing reimbursement for "teleconsultations," said Pat Bousliman, a health care aide to Sen. Max Baucus (D-Mont.), one of the legislation's original sponsors.

Mr. Bousliman and other legislative sources say lawmakers intended to include a broad range of current procedural terminology (CPT) codes that would allow telemedicine doctors to be paid for virtually everything they do in person. But HCFA defines teleconsultation as live, interactive video transmission between a patient and his physician—or midlevel provider such as a nurse practitioner—linked to a specialist. That, and nothing else.

"HCFA's doing things we clearly didn't intend and, unfortunately, the result is doctors don't have much incentive to get involved," said Mr. Bousliman.

"Teleconsultation has become a dirty word," added Jim Reid, director of the Midwest Rural Telemedicine Consortium, which is based at Mercy Medical Center in Des Moines, Iowa. The consortium links 38 remote communities such as Algona and Mount Ary to facilities in Des Moines and Mason City. "HCFA interprets it very, very narrowly. Can you imagine a doctor with a waiting room full of patients leaving to accompany a referral to a consultation?"

Physicians agree. "It's totally contrary to medicine in the real world," said pediatrician Robert H. Cox, MD, medical director of Hays Medical Center, in Hays, Kan. The center operates one of the nation's oldest telemedicine programs, founded in 1990.

HCFA's definition of telemedicine prevents physicians from taking advantage of technology in other significant ways. A good example is store-and-forward consults, in which physicians can record a patient examination, including diagnostic images and sound, and forward it to a specialist for later review. "A cardiologist can come in tomorrow morning, look at his e-mail and have my patient's history, physical, chest X-ray, ECG and even the cardiac sound that concerned me waiting for him," said immunologist Jay H. Sanders, FACP, medical professor at Johns Hopkins University School of Medicine and scientific director of the NASA Commercial Space Center in Houston.

But because HCFA defines teleconsults only as live transmissions, such store-and-forward uses of telemedicine aren't covered. As a result, physicians must make a trip across town—or into another county—to reach a site. "HCFA is demanding a totally artificial way of doing things," Dr. Sanders said.

The Medicare reimbursement policy also raises administrative and ethical questions. For example, to streamline billing, the agency requires consulting physicians to bill Medicare and return 25% of their fee to the referring doctor.

The policy is problematic on several levels. First, it means that consulting physicians do not get their full fee. And while referring physicians get a small rebate, their payment barely makes a dent in the income they lose by having to physically sit in on teleconsults.

But most ironically, some say the arrangement smacks of the kind of kickback that the federal government has outlawed among Medicare providers. "If I did this on my own," said Dr. Sanders, "it would be considered fee-splitting and I could be put in jail."

Not worth the trouble?

Critics say that HCFA's telemedicine reimbursement policy is so restrictive and onerous that a number of hospitals and physicians have decided to skip Medicare reimbursement for telemedicine services. They view telemedicine services as a cost of doing business and simply pay for telemedicine procedures covered by Medicare out of their own pocket.

MedCenter One Health System in Bismarck, N.D., a system that provides teleconsults for rural health care systems, pays its physicians who perform telemedicine procedures for the elderly the same rate they would receive for in-person visits. Administrators at the system said that physicians would have to spend so much time working with HCFA's reimbursement policy that it is simply easier and more cost effective for the health system to foot the bill.

Mayo Clinic similarly pays physicians for telemedicine services out of its operating budget. "The hospital pays for it like any other part of our infrastructure," said Mayo cardiologist Bijoy Khandheria, ACP–ASIM Member.

While these systems have decided to fund telemedicine programs out of their own budgets, their decision to avoid billing Medicare is slowing telemedicine growth. The Mayo Clinic, for example, which five years ago successfully demonstrated telemedicine on Indian reservations and other remote sites, today focuses mainly on an echocardiology program that serves patients within 120 miles of the Minnesota medical center. And while many hospitals continue to use teleradiology, the most commonly accepted form of telemedicine, only an estimated 200 have full-fledged telemedicine programs, a number that is unlikely to grow until the reimbursement issue is resolved.

For hospitals, the HCFA regulations are just the latest part of a long legacy of payment problems. Midwest Rural Telemedicine, created as a HCFA demonstration site five years ago, has faced funding woes typical of telemedicine's slow progress. Although HCFA authorized the program for three years starting in 1995, two years lapsed before Congress funded it. That forced Midwest, like Mayo Clinic and others, to cobble together grants from foundations, government agencies and telecommunications companies, along with money tweaked from hospital budgets, to get by.

That has often meant relying on volunteer labor from physicians. For example, physicians performed consults for free for two years at Dakota Telemedicine System in Bismarck, N.D., which links remote clinics plus nursing homes and other sites in the Dakotas and eastern Montana to MedCenter One Health System. "We'd give them a can of Diet Coke," said Carla Anderson, the program's director. "That was it."

Now the program, which has received national acclaim, funds the program internally and from grants, but it does not seek Medicare reimbursement because of its restrictions.

Physicians hold back

That kind of experience, coupled with lingering skepticism about telemedicine, explains why so many physicians are reluctant to use telemedicine technology, even when their hospital or health system has decided to pay for their services. And as many hospitals can testify, if physicians aren't on board with a telemedicine program, it will wither.

The Konawa Community Health Center in Konawa, Okla., which used a $50,000 grant from Southwest Bell Corp. in 1995 to launch a telemedicine program, has dropped all but teleradiology. "Utilization was low and costs high," said Casey Anson, the center's director. "We used it twice in two years, at a total investment of $140,000."

The intent was to link physicians and midlevel practitioners at remote clinics for quick consults on trauma cases, but few accepted the technology. "The challenge," added a South Dakota administrator, "is getting doctors to incorporate telemedicine into everyday practice."

Ronald K. Poropatich, FACP, a Walter Reed Army Medical Center critical care pulmonologist and telemedicine expert, recently lectured on telemedicine at a Chicago meeting of chest physicians. "Attendance was miserable, to put it mildly," he said. "If we can prove to doctors through studies and peer-review journals that meet all the scientific rigors that this is not a second-class way to treat patients, then we can make a more convincing argument for reimbursement."

Added Dr. Poropatich, who is also a director of the American Telemedicine Association, "I'm afraid we haven't done enough heavy lifting yet to convince our own colleagues."

The problems of interstate licensure have also contributed to physician reluctance. For example, North Dakota doctors complain that South Dakota forces them to drive hundreds of miles to appear before the state medical board for 10-minute hearings that could be handled by videoconferencing. Kansas is another state that critics say has similarly strict rules.

Despite such hurdles, longtime telemedicine supporters remain hopeful. They point out that 14 states that administer Medicaid already authorize telemedicine reimbursement. Medicaid reimbursement is encouraging, they believe, because it shows that some government agencies recognize telemedicine as clinically and financially viable.

"That's because Medicaid has to pay not only for care but transportation, and we have data that show that 80% of the people seen over telemedicine remain at their local sites," said Dr. Sanders.

Telemedicine is also probing promising new areas, such as a program at Hays Medical Center to monitor recently discharged patients with chronic obstructive pulmonary disease and congestive heart failure. Dr. Cox explained that by remotely monitoring factors like oxygen saturation and heart rate, attending physicians can decide whether to bring a patient into a clinic for a full exam or merely adjust medications.

Nevertheless, telemedicine supporters recognize that to get the serious attention of physicians and hospitals, reimbursement needs to be changed. That could happen as early as this spring, when Sens. Baucus and Kent Conrad (D-N.D.) hope to hammer out new legislation that would expand Medicare reimbursement to all rural areas, not just areas with shortages of health professionals, and to cover all CPT codes otherwise reimbursed by HCFA. Sen. Conrad would specifically permit store-and-forward consults and fund government studies of efficacy and cost. That legislation would also fund the critical, peer-reviewed studies of telemedicine's clinical effectiveness that Dr. Khandheria and others believe is needed to convince physicians of the technology's efficacy.

Edward Martin is a freelance writer in Charlotte, N.C.

For more about telemedicine

For more information about telemedicine, visit the College's Telemedicine Resource Center on ACP–ASIM Online at

The center offers an introduction to telemedicine and recent developments. The center also houses an extensive glossary of technical terms, a list of telemedicine Web sites and a bibliography with links to abstracts of journal articles.

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