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Telemedicine offers cost savings, but also poses risks

Telemedicine offers cost savings, but also poses risks

Telemedicine offers cost savings and convenience to employers and workers alike, but the practice also carries several potential pitfalls of which employers should beware. Attorneys Amy Lerman and René Quashie in the health care and life sciences practice at Epstein Becker & Green P.C. in Washington detail the risks and benefits.

Employers remain under extreme pressure to reduce the health care costs of their employees, while cutting absenteeism and increasing employee productivity. Beginning in 2018, a new twist in the form of a 40% excise tax is set to be imposed annually on health plans with premiums exceeding $10,200 per year for individuals and $27,500 per year for families. According to various projections, the so-called “Cadillac tax” may affect at least one-third of U.S. employers because it generally will be applicable to employer-sponsored health plan coverage, including coverage under group plans offered by employers to their employees.

Making the effort to reduce health care costs even more difficult is the fact that many employees hesitate to take time off work, particularly for ailments they perceive as minor. According to the American Medical Association, an average physician's visit can take up to four hours out of an employee's day.

Because many employees skip the doctor, relatively minor health issues often escalate into conditions requiring more intensive and costlier services. To combat this, some employers have established onsite clinics where their employees can access providers to receive sick care and preventive services. But there are high costs associated with creating and operating these clinics. Enter workplace-sponsored access to telemedicine, designed to address all of these variables.

Telemedicine, the diagnosis and treatment of patients via electronic communications, has gone mainstream. While only 20% of U.S. employers offer their employees access to telemedicine services, nearly 40% of U.S. employers surveyed by corporate risk and financial management company Towers Watson & Co. said they plan to offer access to such services in 2015, and an additional 33% surveyed said they are considering offering access to these services within the next three years.

In a recent study focused on U.S. employers with at least 1,000 employees, Towers Watson predicted that employers could save up to $6 billion annually if employees would routinely engage in remote consults for non-urgent primary care. Effective use of telemedicine services could eliminate 15% of physician office visits, 15% of emergency room visits and 37% of urgent care visits, according to the study.

Increasingly, the use of telemedicine technologies is viewed as an efficient and cost-effective method for delivering and accessing quality health care services. Patients also have become more adept at and comfortable with using technology instead of face-to-face interactions with physicians and other health care professionals for certain types of conditions.

This shift can be attributed to several factors, including a health care system rapidly transitioning from fee-for-service to one in which reimbursement is closely tied to quality and patient outcomes.

According to a 2013 Forbes article, annual utilization of telemedicine services was projected to increase to an estimated 3 million patients by 2018 from 250,000 in 2013.

Notwithstanding the benefits, employers considering offering telemedicine should understand some significant, though not insurmountable, legal and regulatory issues related to its use.


State professional licensure laws are a major stumbling block to interstate practice of telemedicine. With limited exceptions, providers must be licensed in every state in which they intend to practice, and each state has its own licensure requirements. Generally, out-of-state physicians, absent certain exceptions, must obtain full and unrestricted licenses to practice medicine in a particular state. Employers should understand how the state(s) in which they are located deal with licensure.

The Federation of State Medical Boards developed an Interstate Medical Licensure Compact to facilitate license portability and the practice of interstate telemedicine. Six states have enacted it, and 11 more have introduced legislation seeking to become Compact states. Similarly, a Nurse Licensure Compact is in place in 24 states, but it covers only registered nurses and licensed vocational nurses. (Compacts for nurse practitioners and physician assistants are being separately developed.)

Physician-patient relationships

States have various criteria for establishing proper physician-patient relationships, one of which is an evaluation or examination of a patient by the treating physician. This is particularly important when a physician is prescribing medications. Some states, Arkansas, for example, explicitly require a face-to-face examination or evaluation before a physician can prescribe online. Other states, including Missouri, require a physical examination or evaluation but do not use terms such as “in-person” or “face-to face” to describe the nature of such exams. Still medical boards in these states have interpreted the applicable laws to mean that the treating physician must meet the patient face-to-face. A growing number of states such as Maryland and Virginia explicitly allow physical examinations or evaluations by electronic means or telemedicine technologies. Privacy and security

Compared with face-to-face encounters, telemedicine encounters are more vulnerable to risks such as third-party interference, signal errors and data transmission outages. These risks may result in loss of data, interrupted communications or alteration of important clinical information and, in turn, make telemedicine open to breaches of protected health information. The federal Health Insurance Portability and Accountability Act's privacy and security regulations are particularly relevant to telemedicine and the electronic data they generate. State by state, analogous privacy and security laws must be carefully considered. The Federal Trade Commission also is taking a more active role in enforcement in the area of health information breaches.

Medical liability

Adapting existing principles of malpractice liability to telemedicine is a challenging task, especially the question of what constitutes an appropriate “standard of care.” There are many unresolved issues and questions regarding malpractice liability as it relates to telemedicine, including the nature of physician-patient relationships, informed consent, practice standards and protocols, supervision and availability and provision of professional liability insurance coverage.

Fraud and abuse

Finally, all potential telemedicine arrangements must comply with all applicable federal and state health care fraud and abuse laws, including anti-kickback statutes and/or physician self-referral prohibitions.

When contemplating potential fraud and abuse risks, each state has its own versions of these laws, so state-by-state analyses often are necessary. Specific facts and circumstances always must be considered because these analyses are not one-size-fits-all.

Employers seeking to access the telemedicine market must carefully assess the legal and regulatory requirements and limitations of any potential arrangements.

Amy Lerman is an associate in the health care and life sciences practice in the Washington office of Epstein Becker & Green P.C. She can be reached at and 202-861-1832.

René Quashie is a senior counsel in the health care and life sciences practice with the firm. He can be reached at and 202-861-1888.

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