Telemedicine reimbursement

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When developing a business case for telemedicine, it is important that reimbursement rates are considered and alternative reimbursements streams are evaluated. In some cases, Medicare is reimbursing at 100% for all submitted claims, while in others the reimbursement rate is closer to 40%. Here are some telemedicine business models that have been proven to work:


Two terms that will be used frequently in this discussion is the Hub or Provider Site, and the Spoke or Patient Site. In many cases more then one model can be used at the same time. There are also some overlap between the different models.

Third Party Insurance Reimbursement

In this reimbursement model, the Spoke/Patient site is able to charge both a facility and technical fees associated with the patient visit. The Hub site whom provides the Professional service remotely submits a CPT code based claim using a modifier - GT.

  • Caveat: In order to bill insurance companies, in many instances the Professional who provides the consult must be licensed in the state that they are providing the services to and must be credentialed as an on-site physician within the patient site. The patient that is being consulted on must also be first admitted as a Patient to the Spoke site, before the Hub site can bill for their professional services.
  • Example: For oncology, the Oncologist (Hub) provides remote cancer care and can bill Medicare or any qualifying private insurer for his services. The Receiving site (Spoke) can bill the patients insurance companies for the chemotherapy drugs they administer and any other tests that end up being needed such as laboratory. In this case, the patient is not getting charged anymore then they would have if they were seen in person by the Oncologist. The patient will save money and time by not having to drive out of town to see the Oncologist who practices in a far away city.

Per Click

This is a one-time fee paid by the Spoke/Patient site for each consult provided by a Specialist. A Hub/Consultant site should consider a 'per consult' or 'per-click' payment model if they have a large number of Medical Professionals who are already taking call every night for their existing facilities and have the extra manpower to provide additional services to locations who are understaffed.

  • Example: a Hub might have several Intensivist working at a facility over a 24/7 basis who could meet a larger patient load. The Hub could contract for these Intensivists to be remotely on-call to cover ICU patient located at other facilities. Whenever a facility needs an ICU consult, they would call the Hub of Specialists and pay the Specialists for each consult that is provided to them.

On-Call / Shift Payment

A per shift fee is paid to one or Medical Specialists to be remotely on-call for a particular site.

  • Example: a Stroke Neurologist can be paid a fixed on-call fee for being available to provide a remote consult in the event that a patient presents to the Emergency Room with stroke symptoms. The Spoke site will pay the Stroke Neurologist a fixed fee for that shift and the Stroke Neurologist will provide as many consults that are required during that shift.

Shared Resource Payment

In this model, the Spoke site and in some cases the Hub site share the costs of the telemedicine equipment. Both sites form a partnership with a letter of understanding that the results of the telemedicine program will benefit both sites in-kind, and as such, no exchange of money is required. For this model to work, a win-win situation must be created. For both sites to win, they need to ensure the patient receives the best care possible. This is a model that works well for a variety of patient populations such as stroke and neonatal care. In the example of a stroke population, the Spoke site ‘wins’ if they can keep a larger proportion of stroke patients in their facility by having a remote consultant overseeing their care. The Hub site ‘wins’ in that they can be sure that only the most needy patients are referred/transferred to them for care. The patient transfer may result in interventions, operations and rehabilitation services. The patient wins in that they get transported only when necessary and in either case will remain in the location that is best suited to care for their illness.

This has also been proven for Neonatal care. In many cases Spoke sites are not equipped to handle high risk pregnancies and the complications that follow and if something goes wrong the baby needs to be transported to the closet neonatal ICU possible. By having a remote Neonatologist involved with the high risk birth and delivery they can prepare the necessary resources to ensure that everyone is ready for the transfer of the baby and the mother will feel comforted that their baby is being well taken care of. As the cost of the telemedicine equipment and services can sometimes be very expensive, a Hub in many cases elects to pay for all equipment for the first year or two. This gives the Spoke site less risk and gives them time to prove the profitability of the partnership. In many cases it can take up to 6 months to get a clear ROI on telemedicine. Care must be taken to ensure that Stark Law is not violated when using this model.


In this model, a Government or Privately funded grant is awarded and used to develop a telemedicine service line. This model is useful to cover the upfront costs in starting a telemedicine partnership but can only serve as a bridge to the development and validation of a sustainable business model. All grants should begin with a sustainable model in mind. Too many grants have failed because a sustainable business model was not created.


In this model a Spoke site subscribes to one or more services from a Tertiary or Specialty care group/site. They may for example subscribe for Infectious Disease, Intensivist Coverage, Hospitalist coverage, Cardiology services. As such they will pay a monthly subscription fee for the service and as part of the subscription will be provided a certain number of consults during that month. This can also be combined with the ‘per-click’ model. An example of this model is a Critical Care service company that provides 24x7 Intensivist services. The Spoke/Patient site pays a monthly ‘retaining or subscription fee’ and every time the Spoke site calls for a consult they also pay a one time consult fee so long as the consult is less then 1.5 hours long. The Spoke sites have benefit from a strong ROI from this model as they can increase the number of ICU bed stays in the hospital which have a dramatic effect on their bottom line. Another example of this model involves the use of PSOs

Professional Service Organizations

These are specialized and dedicated service organizations that provide a variety of telemedicine service lines. Many PSOs today are providing Stroke, Hospitalist or Intensivist services. They may also contract with other independent specialists such as Psychiatrists, Nephrologists, and Infectious Disease Specialists to provide added value to their customers. For a monthly fee you can contract with such an organization to provide specialized staff coverage for any of your departments. Many of these companies work on a monthly subscription fee and may also tie in a per-click consult fee on top of that.

When contracting with such organizations all the Professionals providing consults must be licensed to practice in your state and in many cases must also have privileges in your hospital. Such organizations may also bill insurance companies for their services. In most cases the PSO services result in allowing the Spoke site to keep more patients within their facility and results in increased census. This has become a very popular and profitable solution.

Staff Efficiency

In this model there is no Hub site per se and generally no third party contracts. A hospital purchases the telemedicine equipment to provide their existing staff with tools to better manage their patients. For example, in one large academic medical institute, telemedicine is used by the Neurological Intensivist to round on patients at night while the Dcotor is at home. Providing extra night-time rounds has resulted in a decrease in patient bed days and reduced complications of patients at night time allowing the Doctor to get more undisturbed sleep and night time pages. Another example of this is allowing employed Hospitalist provide services remotely.

Outpatient Care Services

Medical Specialists agree to provide a variety of scheduled outpatient care services to facilities that lack the specialty. For example, a Dermatologist has agreed to pay a critical access hospital a nominal fee per patient that the critical access hospital provides. This fee covers the overhead of the outpatient clinic such as nursing support, medical supplies and space for the remote consult. In this example approx.. 20% of patients get referred to the Dermatologist for follow ups such as biopsies, while at the same time the Dermatologist can bill the patients insurance company for the professional services rendered. The critical access hospital benefits in that they too get the ability to perform additional tests such as lab work and at the same time are able to charge the patients insurance company for the facility and technical services provided during the visit. Additionally, the community or critical access hospital is able to provide a wider range of medical services to their community. Another example of this is in the provision of Speech Therapy services. In such a case, the provider of the Speech Therapy services will charge other hospitals a one time fee for the therapy session.

Contracted Care Service Model

In this model a critical access hospital signs an agreement with a large tertiary care center for a particular service such as Pediatric Cardiology, Dermatology, Nephorology and/or Rheumotology. In this example the tertiary care center pays the critical access hospital based on a contracted rate for the ability to provide services to that particular hospital. The Tertiary care facility is willing to pay the contracted rate to become the ‘preferred-provider’ for that particular specialty, because they expect in return some of those patients will be referred to them for follow up care.

Curb Side Consults

Curb side consults are provided by Medical Specialists who do not have privileges to provide care in a particular hospital and who may not be licensed to provide care in the state where the patient is located. In this case, there is no exchange of money and the Provider gives his consultancy services in Good Faith as a way to develop and foster a partnership with that particular facility and to create a referral pattern.

Medicare Cost Reporting Medical Department Director Fee

In this model a monthly fee is charged to a Spoke site to cover the costs of providing a remote Medical Director to supervise the particular department, such as an ICU. Third party payers are not billed in this model and the monthly directorship stipend covers all telemedicine services provided to that site. The Director fee can be recorded in the hospitals Medicare Cost Report which allows them to be reimbursed a percentage of this cost based on the population of medicare patients in that facility. For example, if 40% of the facilities patients are medicare, that hospital can get 40% of the Medical Director department fees reimbursed by Medicare.

Revenue Sharing Model

this model overlaps with the reimbursement model, but in this case a PSO contracts with a number of medical specialists and manages all the billing for the services that are provided. In exchange for the specialists services who may already be getting paid based on a contracted shift rate model, the PSO will also give the provider as much as 80% of the money collected from third party insurance companies.

Night time Nocturnist / Hospitalist program

In this model all patients that arrive to an Emergency Department are evaluated by a Nurse Practionner or midlevel care provider. Many critical access hospitals and small community hospitals do not have a trained Emergency Room doctor on site 24/7. In such a location, a remote Nocturnist is made remotely available. Once the patient is admitted into the facility, the Norturnist can provide and bill for his service and ensure the patient gets transferred into the most appropriate department.

Group Purchasing Model

I am not aware of this model being used as of today but it certainly has potential. In this model a number of small hospitals pool their resources in order to contract with a third party company such as a PSO, Tertiary Service Provider or Specialty group to be on-call for all the facilities at the same time. Instead of each facility individually paying a single provider organization a on-call shift payment, they all subscribe and bundle for the same service allowing each to leverage each other in a group purchase. As a result that Provider group gets paid one fee to be on-call for all the hospitals at the same time. This single fee payment mechanism allows the stacking of sites under a single service contract.

The information that follows was copied in parts from sources provided by the American Telemedicine Association

This article attempts to outline both Federal, State and Private Insurance guidelines and policies.

Federal Coverage

CMS finalized their proposals to add the following requested services to the list of Medicare telehealth services for CY 2011:

  • Individual and group kidney disease education (KDE) services (HCPCS codes G0420 and G0421, respectively);
  • Individual and group diabetes self-management training (DSMT) services, with a minimum of 1 hour of in-person instruction to be furnished in the year following the initial DSMT service to ensure effective injection training (HCPCS codes G0108 and G0109, respectively);
  • Group medical nutrition therapy (MNT) and health and behavior assessment and intervention (HBAI) services (CPT codes 97804, and 96153 and 96154, respectively);
  • Subsequent hospital care services, with the limitation for the patient's admitting practitioner of one telehealth visit every 3 days (CPT codes 99231, 99232, and 99233); and
  • Subsequent nursing facility care services, with the limitation for the patient's admitting practitioner of one telehealth visit every 30 days (CPT codes 99307, 99308, 99309, and 99310).

Furthermore, CMS is revising §410.78(b) and §414.65(a)(1) accordingly. Specifically, the agency is adding individual and group KDE services, individual and group DSMT services, group MNT services, group HBAI services, and subsequent hospital care and nursing facility care services to the list of telehealth services for which payment will be made at the applicable PFS payment amount for the service of the practitioner. In addition, CMS reordered the listing of services in these two sections and removed "initial and follow-up inpatient telehealth consultations furnished to beneficiaries in hospitals and SNFs" in §410.78(b) because these are described by the more general term "professional consultations" that is in the same section. Finally, CMS is continuing to specify that the physician visits required under §483.40(c) may not be furnished as telehealth services.

The telehealth originating site facility fee was raised to $24.10.

The full final rulemaking is available at with the major telehealth section from pages 486 to 526. There are other provisions addressing more specific forms of telehealth, such as cardiac event monitoring.

This final rule is scheduled to be printed in Federal Register on November 29, 2010.


California law mandates that all health care service plans cover services that can be adequately provided through telemedicine. California Health and Safety Code, Section 1374.13, lists the standards which health care service plans must meet and requires that the Medi-Cal managed care program plans also cover telemedicine services.


In 2009, the Oregon State Legislature passed Senate Bill 24[1] to join the states specifying that insurance plans cannot discriminate against otherwise covered services that are provided by a telehealth method. Section 743A.058 of the Insurance Code of Oregon Revised Statutes reads as follows:

743A.058 Telemedical services.

  1. As used in this section:
  • (a) “Health benefit plan” has the meaning given that term in ORS 743.730.
  • (b) “Originating site” means the physical location of the patient receiving a telemedical health service.
  • (c) “Telemedical” means delivered through a two-way video communication that allows a health professional to interact with a patient who is at an originating site.
  1. A health benefit plan must provide coverage of a telemedical health service if:
  • (a) The plan provides coverage of the health service when provided in person by the health professional;
  • (b) The health service is medically necessary; and
  • (c) The health service does not duplicate or supplant a health service that is available to the patient in person.
  1. An originating site for a telemedical health service subject to subsection (2) of this section includes but is not limited to a:
  • (a) Hospital;
  • (b) Rural health clinic;
  • (c) Federally qualified health center;
  • (d) Physician’s office;
  • (e) Community mental health center;
  • (f) Skilled nursing facility;
  • (g) Renal dialysis center; or
  • (h) Site where public health services are provided.
  1. A plan may not distinguish between originating sites that are rural and urban in providing coverage under subsection (2) of this section.
  2. A health benefit plan may subject coverage of a telemedical health service under subsection (2) of this section to all terms and conditions of the plan, including but not limited to deductible, copayment or coinsurance requirements that are applicable to coverage of a comparable health service provided in person.
  3. This section does not require a health benefit plan to reimburse a provider for a health service that is not a covered benefit under the plan or to reimburse a health professional who is not a covered provider under the plan.