Why has telehealth adoption been slow? The market factors are many – low acceptance by clinical professionals, service workflow, integration into clinical recordkeeping systems, loss of traditional revenue streams, licensure requirements, and reimbursement are just a few (see The Telehealth Market – Now, Soon & Future, The Telehealth Market – The Future Has Arrived, and The Uneven Adoption Of Telehealth – The Idaho Example).

From a national perspective, the adoption of telehealth is uneven because these market factors vary widely across markets and payers. But I think that not all market factors are equal. Financing and reimbursement tend to outweigh other factors. And as we move to pay-for-value initiatives, telehealth will be part of the “solution.” Pay-for-value contracting is likely to not only make telehealth feasible, but force even unwilling provider organization management teams to adopt telehealth to remain competitive.

I thought of this when I read about the new Center for Medicare & Medicaid Services (CMS) rules for bundled payments for hip and knee replacements. On November 16, CMS released a new mandatory payment model – a bundled rate – for hip and knee replacements called the Comprehensive Care for Joint Replacement, or CJR (for more, seeComprehensive Care for Joint Replacement Model). Under the new reimbursement model, hospitals are responsible for the costs from the time of the surgery through 90 days after hospital discharge. Hospitals, physicians, and post-acute care provider organizations will be paid fee-for-service (FFS), and their total payments will be reconciled against a target amount. If the hospitals that are accountable for the bundled payments come in under budget, they will receive a bonus. If they spend more than the target, they will owe money to CMS. The program goes live in 67 metropolitan statistical areas on April 1, 2016. The downside and upside financial risk for hospitals will be phased in over a five-year period. Hospitals must also meet quality benchmarks for the episode of care.

But the big news in the new bundled rate model are the significant “waivers” of previous Medicare rules. The big issues include a waiver to the requirement that beneficiaries have a three-day inpatient hospital stay before they can be admitted to a skilled nursing facility (SNF), and an allowance for some physician-directed home visits by licensed clinical staff for non-homebound beneficiaries. But I think the really exciting development is that in the new model, CMS waives some of the requirements that limit telehealth payments. Medicare has specific guidelines on the reimbursement of telehealth – typically telehealth is only reimbursable when the originating site is a designated medical facility (not in a home or community setting) and in areas that are designated as rural or a Health Professional Shortage Area (HSPA). Medicare also traditionally requires that telehealth be delivered via an interactive system with real-time audio and video communications. Under the bundled rate model, CMS will waive Medicare’s geographic and originating site requirements, allowing the provider organization to use telehealth in any region and from home or other community settings (for more, see Telehealth Scores Big in Joint Replacement Bundled Payment Plan and CMS Grants More Flexibility for Telemedicine Services Under Bundled Payment Model for Joint Replacements).

I think this is an example of what we’re likely to see in the shift to pay-for-value contracting for services. While health care actuaries are hesitant to expand coverage for new services – like telehealth – under FFS reimbursement models where it is difficult to control volume, the financial incentives and cost-offset are far different in non-FFS payment arrangements. Permitting telehealth makes both clinical and financial sense in these new models. And as case rate, bundled rate, and other risk-based provider reimbursement models become more common, managers of provider organizations will likely find that they need to adopt tech-enabled service delivery models to make a margin and offer competitive rate to payers.

For more on what the current telehealth landscape looks like, and setting your organization on the right path to either adopt a new program, or refine the program you have, check out these resources from the OPEN MINDS Industry Library:

1. Telehealth Reimbursements 2014: Medicare
2. Telehealth Reimbursements 2014: Health Plans
3. Telehealth Reimbursements 2014: Medicaid
4. Telehealth Licensure & Legislation Updates
5. Telehealth – What Should You Know ‘Before The Curtain Goes Up’?
6. Assessing Your Organization’s Readiness For Telehealth
7. The Telehealth Developments Keep Coming: An Executive Update
8. What Government Telehealth Opportunities Are Out There?

And for more on pay-for-value, don’t miss the session,Transitioning Your Current Reporting & Performance-Management System From Fee-For-Service, To Pay-For-Value, led by James Stewart, OPEN MINDSAdvisory Board Member and institute chair, onFebruary 11 at The 2016 OPEN MINDS Performance Management Institute in Clearwater, Florida.