Telehealth Grew Dramatically During the Pandemic. Now Let's Look at the Fraud.

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COVID-19 caused a huge spike in demand for telehealth services, but it opened the door for bad actors as well.

When Joe Kvedar, a dermatologist at Massachusetts General Hospital, announced on his blog two years ago that he would soon be taking over as president of the American Telemedicine Association, he did so with the reflection that his industry was like a stacked bonfire waiting for its match.

Billions of dollars had already been invested in the technology and infrastructure to deliver health care over remote communications platforms. More money was pouring in all the time. Venture capital funding for telemedicine in the first quarter of 2020 alone would rise to $788 million. But for all that fuel, there were not enough flames. In his blog, Kvedar lamented the fact that only 15 percent of his physician colleagues offered telemedicine appointments at all, which meant that a far smaller percentage of routine medical visits were done remotely.

“The kindling is there,” Kvedar wrote in 2019, but telemedicine needed to do better. “We need to add some sparks,” he said. 

Then along came COVID-19—it was more a flamethrower than a spark—and telemedicine exploded overnight. At the start of January last year, it accounted for less than one percent of all doctor’s visits. By April, it was more than two-thirds of the total. Nothing would ever be the same again.

Thrust into a new era

The horror of the unfolding pandemic overshadowed the fact that industry advocates had been pushing for wider adoption of telemedicine for years. It was traditionally seen as the single stone that could kill many different birds, promising answers for the coming U.S. doctor shortages expected this decade and offering tantalizing possibilities to address society-level problems like the increasingly aged U.S. population, growing chronic illness, and stark disparities in health care access. On top of that, telemedicine was seen as something both patients and providers crave.

But the industry has faced many hurdles through the years to providing online care. As far back as the mid-1980s, innovators had become frustrated by policy, legislation, and regulations not keeping up with technology. Meanwhile, the evidence supporting the effectiveness of telehealth was racking up. In recent years, scholarly articles have bemoaned the lack of coordination both within and between federal and state governments as well as arcane, unpredictable, and piecemeal laws, regulations, and payment policies that impede the full embrace of telehealth by patients and providers and—of even more importance—its adoption as a reimbursable expense by private and public insurance plans. 

Those barriers were all swept away effective March 6, 2020 after the Centers for Medicare and Medicaid Services (CMS), then under the leadership of Seema Verma, loosened regulations for telehealth providers who offer virtual appointments by phone or video in lieu of office visits to help fight the pandemic. The most important initiative was the elimination of the “originating site” rule, which says that patients can only receive telemedicine services if they live in an underserved area and only at a local health care facility. This cleared the way for Medicare and Medicaid to pay for anyone to consult a doctor from home, instead of restricting telehealth services to people who live in rural areas or other places where certain specialists and services are in short supply.

Telehealth usage peaked at 69 percent of total doctor’s office visits in April 2020 and then leveled-off later in the year to 21 percent.

The Centers for Medicare and Medicaid Services, the agency that administers the two government-funded programs, also gave the green light to coverage of audio-only visits which make up about one-third of Medicare beneficiaries’ telehealth consultations. Private insurance companies and state governments followed suit. They relaxed their payment policies to reimburse telemedicine at the same rate as in-person visits and waived cost-sharing like copays and deductibles. And in response to the pandemic, 41 states and three territories have instituted some form of waiver of licensure requirements for telehealth that have allowed out-of-state physicians to provide telehealth to residents.

Together those moves all made telehealth blow up overnight. According to researchers at the Epic Health Research Network, a recently launched website hosted by electronic health record powerhouse Epic Systems and geared toward rapid sharing of medical data, telehealth usage peaked at 69 percent of total doctor’s office visits in April 2020 and then leveled-off later in the year to 21 percent, still much higher than the pre-pandemic rate of just 0.01 percent.

But as telemedicine exploded, so have concerns over mounting fraud and noncompliance. 

Good medicine meets bad actors

Since the beginning of the year, the U.S. Department of Health and Human Services has started three new audits of telehealth services, one for standard Medicare services, the second for home health service providers, and the third for behavioral health in Medicaid. The government also launched a record number of fraud prosecutions last year against telehealth service providers—including physicians, telemedicine companies, patient data brokers, and medical equipment suppliers suspected of overbilling the government.

In September, the Department of Justice announced its largest takedown to date with the indictment of 86 individuals involved in an alleged $4.5 billion worth of telemedicine fraud. The fraud allegedly worked like this: Telemedicine executives would pay doctors and nurse practitioners to order unnecessary genetic tests, equipment, and pain medications after only brief patient “visits” by telephone. Sometimes no patient interaction took place at all. The equipment suppliers, genetic testing labs, and pharmacies would then fill the orders in exchange for kickbacks to the telehealth company and bill the government for reimbursement. 

In addition to the criminal indictments, the CMS Center for Program Integrity revoked the Medicare billing privileges of 256 medical professionals, such as doctors, physician assistants, nurse practitioners, and other licensed professionals for their involvement in illegal telemedicine schemes as part of the crackdown. The fraudsters solicited people through telemarketing calls, direct mail, and internet and television ads. Through the fraudulent “visits,” they would further mislead people about their health care needs with fake diagnoses and unneeded tests, in some cases even causing people to delay seeking appropriate treatment. 

Attorneys at multiple law firms have anticipated that the government might focus further enforcement efforts on uniquely telehealth-enabled fraud, like providers who inflate the duration or complexity of a telemedicine consultation or bill for a more expensive type of telemedicine service than actually provided (e.g., audio vs. video) to increase reimbursement. Other red flags that could lead to investigation include a surge of new patients where the provider does not also have an in-person relationship and sudden jumps in the number of remote visits relative to prior in-person visits. 

In one sense, the rising incidence of fraud is not surprising, given the growing popularity of telehealth since the onset of the pandemic, but what will happen after coronavirus ends? All indications are that telehealth is here to stay going forward. The consulting company Deloitte predicts that virtual video visits alone will rise to 5 percent of all annual visits globally, from 1 percent pre-pandemic.

The future of telehealth fraud

The March 2020 concessions that led to the explosive growth of telehealth are due to end when the public health emergency is over, but there is bipartisan willingness in Congress to make permanent the originating site waiver, which allows people to consult with doctors from home instead of at a local facility. MedPAC, a government agency that provides analysis to the U.S. Congress on Medicare, has also recommended that audio-only coverage and telehealth service expansion stay in place for one to two years after the pandemic is over. Medicare can use this time to collect data on cost, usage, and fraud and implement appropriate safeguards afterwards. 

So, should we predict continued boom days for telehealth and telehealth fraud? 

Perhaps. Harvard Medical School’s Ateev Mehrotra and colleagues suggested in an August 2020 briefing from the Commonwealth Fund, a U.S. nonprofit devoted to equity in health care, that patients and providers should be required to have an initial in-person visit before moving to telehealth and a limit on the number of telehealth visits during a given period. But Mehrotra cautions that the hard data on the possible impact of such restrictions remains scarce, while a potentially better policy strategy may be to focus on expanding telehealth and then “put a lot more investment into trying to target fraud.” 

The government’s recent audit notices are a “warning sign” to bad actors that “you’re on notice, we’re going to be watching.”

Health and Human Services officials announced a plan to conduct a review to obtain evidence and provide recommendations about making telehealth flexibilities permanent. But the department has drawn a distinction between the focus of this review and the fraudulent schemes that have been the target of recent investigations where telemarketers partner with unscrupulous doctors to conduct sham remote visits or bill for unnecessary tests and equipment. 

The industry and its supporters have taken this announcement as a sign that the government is focusing on well-worn fraud schemes, and that new providers are not automatically suspect. “They may be getting a little more technologically savvy, but we know who these people are,” says Kyle Zebley, the telemedicine association’s director of public policy.

According to Carrie Nixon, managing partner at Nixon Gwilt, a Washington, D.C.-area law firm, the government’s recent audit notices are a “warning sign” to bad actors that “you’re on notice, we’re going to be watching.” 

Beyond telehealth fraud, the Biden Justice Department has been stepping up its enforcement efforts on fraud stemming directly from COVID-19 relief programs. But the “fraudulent-prescription kickback”-style schemes like the one taken down in September don’t appear to be going away any time soon.

For its part, the American Telemedicine Association has indicated that it would consider additional “guardrails” for telehealth visits that do not require prior in-person consults, or limit access to any one format, such as audio-only, since telehealth is not uniquely prone to fraud.

But if the telehealth fire is going to keep burning, the most important next step is permanent removal of the originating site rule by federal legislation. “It would set telehealth back enormously if we don’t get that fixed,” advised Kvedar. 

Disclosure: The author is a small shareholder of CVS Health stock. CVS is not mentioned in the article, but it owns the health insurance company Aetna, whose business is impacted by changes in health care delivery.

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