Congress orders HCFA to pay for telemedicine

September 1, 1997

Congress orders HCFA to pay for telemedicineLegislation seen as boost for rural telemedicine providersIn a move being hailed as a landmark for the advancement of telemedicine in the U.S., Congress has included provisions requiring

Congress orders HCFA to pay for telemedicine

Legislation seen as boost for rural telemedicine providers

In a move being hailed as a landmark for the advancement of telemedicine in the U.S., Congress has included provisions requiring Medicare reimbursement for rural telemedicine services in the Balanced Budget Act of 1997. The legislation is a scaled-down version of the Comprehensive Telehealth Act of 1997 (S. 385), authored by Sen. Kent Conrad (D-ND), and was adopted as part of the budget passed on July 31. It calls for the Health Care Financing Administration (HCFA) to establish payment guidelines and begin reimbursing for telemedicine consults in rural Health Personnel Shortage Areas (HPSAs) by Jan. 1, 1999.

"Ensuring that rural telehealth providers get reimbursed for the work they do is key to getting quality healthcare to remote communities," Conrad said.

The legislation is also a major step forward for the telemedicine industry. Once implemented, it is expected to result in $100 million to $200 million per year for telemedicine reimbursement via Medicare. In addition, it should lead to increased adoption and utilization of telemedicine technologies and prompt other insurers to consider similar reimbursement plans.

The timing is right, according to many observers on Capitol Hill. Federal funding for telemedicine demonstration projects has been declining in recent years, and legal and regulatory issues have stymied the industry's growth. Foremost among these barriers have been interstate licensing and lack of reimbursement, particularly Medicare reimbursement.

HCFA, which oversees Medicare payments and policies, has been reluctant to take a definitive stand on telemedicine for several reasons, including concerns about risk of overutilization, a lack of equipment standards, and what the agency believes is a dearth of data documenting the clinical and cost-effectiveness of telemedicine. In an effort to address these concerns, the agency last year began a three-year demonstration project to assess the value of telemedicine for its Medicare population. The agency has contended that it would not be prepared to make any decision regarding reimbursement for telemedicine services until that project is completed in October 1999, and reiterated its position in a recent status report submitted to Congress earlier this summer (PNN 6/97).

However, thanks in large part to persistent lobbying efforts by industry and healthcare representatives, the federal government overruled HCFA's three-year plan and adopted S. 385's Telehealth Reimbursement Provisions.

"The telehealth community really stepped up to the plate and let Congress know how important this was," a spokesperson for Sen. Conrad's office said.

Narrow scope

The legislation does have its limitations, however, including the fact that it does not go into effect for another year and a half. In addition, only primary medical HPSAs in rural, or non-metropolitan, areas are eligible. An HPSA is defined by the ratio of patients to providers; at present, that ratio must be 3500:1 for primary medical HPSAs. There are more than 2500 primary medical HPSAs in the U.S., about 1700 of which are in rural, or non-metropolitan, areas. The total population of designated primary medical HPSAs is nearly 45 million, with 20.7 million residing in non-metropolitan areas. Of these, fewer than six million are Medicare beneficiaries.

"I consider this to be big step forward and a foot in the door for reimbursement," said Jay Sanders, president of the American Telemedicine Association in Washington, DC. "But it must be considered almost more symbolic than anything else because it is limited to underserved rural areas, not all rural areas. And what about inner-city underserved areas?"

In addition, he noted, the bill calls for packaged payment that covers both the consultant and the referring physician, but provides no reimbursement for communications cost or facility fees.

"There are significant limitations in the law that may not make it as economically viable at this time as people would like," said Dena Puskin, director of the Office of Rural Healthcare Policy.

Even so, Sanders, Puskin, and other industry and government officials agree that the bill represents a landmark. It is especially significant when considered in conjunction with the Telecommunications Act of 1996, which contains provisions regarding improved access to telecommunications services for rural areas of the U.S. In particular, the FCC established guidelines intended to provide up to $400 million annually to help offset the high cost of advanced telecommunications for health providers serving rural communities.

Gray areas

The next step is for HCFA to determine how to implement the approved provisions of S. 385. Initially this means establishing a working group to address several gray areas within the legislation, such as the bundled payment requirement.

"Congress has given us a total figure, and we can't exceed the fee schedule for the practitioner," said a spokesperson for HCFA. "But the bill does not exactly tell us how much to give the consultant. And what if the presenting practitioner is not a doctor, and the consultant is? Then you have two different fee schedules."

Location is also a factor.

"It could be that one physician is in one geographic payment area, and the consulting physician is in another," the spokesperson said. "So how much do we pay?"

Other considerations include developing a payment structure that considers telecommunications charges and facility fees. HCFA also intends to continue with its demonstration project; in fact, as part of S. 385, the agency is required to submit a report to Congress by January 1999.

"This legislation assumes there is a clinical effectiveness to telemedicine," said the HCFA spokesperson. "And of course it is clinically effective in certain applications, but we don't know if that is a universal truth. And we have to consider the whole population we serve."

In the meantime, practitioners and vendors alike are awaiting HCFA's initial draft of the reimbursement rules. Groups such as the National Rural Health Association and the Joint Working Group on Telemedicine may provide input during this process.

And although much of the telemedicine industry is excited by this development, few manufacturers are ready to predict exactly how it will affect equipment sales. But those in the field already know it will make a huge difference in their ability to deliver quality healthcare to remote populations.

"The fact that we now have a federal mandate to pay for medical care in rural America is welcome news," said Howard Vincent, president of the Rural Health Association for Oklahoma, a state where 65 out of a total of 77 counties will benefit from the new legislation.