chevron-down Created with Sketch Beta.
June 01, 2018

Growth of Telehealth Industry Puts Medicare Telehealth Reimbursements on Government Radar

Hal Katz, Husch Blackwell LLP, Austin, TX and Loreli Wright, Husch Blackwell LLP, Denver, CO

The telehealth industry continues to grow rapidly, and regulators are beginning to take notice.

With the global telehealth market projected to more than quadruple in value over the next five years,1 even slow-moving government payors have responded to the pressure to expand reimbursement options for telemedicine services. But reimbursement woes continue to top the list of concerns voiced by providers,2 and the U.S. Department of Health and Human Services’ Office of Inspector General (OIG) is keeping a watchful eye on reimbursement-related growing pains. On April 30, 2018, OIG released a report3 that identifies the impact of some of these growing pains on Medicare claims payments.4

How common are these billing mistakes?  

The review, conducted by OIG’s Office of Audit Services Findings and Opinions, revealed that up to a third of the $17.6 million in payments from Medicare for telehealth services in 2014 and 2015 were paid in error as a result of lax oversight and poor practitioner education on Medicare’s billing requirements for telehealth services. OIG reviewed 100 paid telehealth claims, focusing on claims billed through a distant site that did not have a corresponding originating-site fee. Thirty-one of those claims were paid for services that did not meet federal reimbursement requirements, leading OIG to conclude that Medicare overpaid telehealth providers by approximately $3.7 million during the two-year audit period. The overwhelming majority of the erroneously paid claims (63 percent of those found in OIG’s audit) were not reimbursable because the patients received services at non-rural originating sites. Other errors arose from services provided by ineligible institutional providers, at unauthorized originating sites, by an unallowable means of communication, by a physician located outside the United States, or from claims billed for non-covered services.5

How can providers ensure that their telehealth claims are reimbursable?

Federal regulations restrict which claims are reimbursable under Medicare based on the location of the patient receiving services, the facility or practitioner billing for the service, the means of communication used, and the type of services provided.

The April 30 OIG report concludes that, by far, the most common errors in claims submitted to Medicare for telehealth services were related to the location of the originating site. The originating site of a telehealth service is the location of the patient at the time the service is being furnished.6 An originating site can be a physician’s offices, a critical access hospital (CAH), a rural health clinic, a federally qualified health center, a hospital, a hospital-based or CAH-based renal dialysis center, a skilled nursing facility, or a community mental health center. But, importantly, the site must be located in a rural area. Specifically, the regulations require that originating sites must be:

Located in a county that is outside of a metropolitan statistical area (MSA);7
Located in a health professional shortage area (“HPSA”)8 that is either outside of an MSA or is within a rural census tract; or
An entity participating in a federal telemedicine demonstration project,9 approved by or receiving funding from the Secretary of Health and Human Services as of December 31, 2000.10

These regulations make clear that claims for telehealth services are not payable by Medicare when the services are provided to a patient when the patient is in his or her home or in an independent renal dialysis center. Additionally, although a separately billable facility fee can be claimed and paid to an eligible originating site, opting not to submit a claim for the facility fee does not render the service reimbursable if it is provided to a patient in a location other than an eligible site. The report points out that, without the addition of a new field to the standard claim forms, there is no capability to institute a claim payment edit to detect claims that should be denied based on the patient’s geographic location. Because the Centers for Medicare & Medicaid Services (CMS) has no plans to make such a significant change to its standard claim forms, post-payment reviews are the only means available for regulators to detect claims that don’t meet federal requirements. To help practitioners avoid this common billing error, Medicare offers an online tool11 that determines whether a facility’s physical address is geographically eligible to serve as an originating site for telehealth services.

Regulations also restrict which providers may furnish telehealth services. Most practitioners can receive Medicare reimbursement for services provided via telehealth technologies. Eligible practitioners are physicians, nurse practitioners, physician assistants, nurse midwives, clinical nurse specialists, clinical psychologists, clinical social workers, registered dieticians or nutrition professionals, and certified registered nurse anesthetists.12 Institutional providers, however, are generally not permitted to collect from Medicare for telehealth services. These claims are payable by Medicare only if the institutional provider is (1) a CAH that has elected the Method II payment option,13 where telehealth services are provided by a practitioner who has assigned his or her billing rights to the CAH or (2) a CAH, where medical nutrition therapy services are provided via telehealth technology.14

Additionally, certain telehealth technologies are not approved to provide services otherwise reimbursable by Medicare. Providers must use a real-time, interactive audio and video telecommunications system (such as video conferencing)15 but they are not allowed to bill for telehealth services for providing care via telephone, fax, or email.16 There is a very narrow exception to the interactivity requirement that allows for certain telemedicine demonstration programs in Alaska and Hawaii to receive reimbursement for the use of “asynchronous store-and-forward” services, 17 wherein clinical data, images, sound, or video is acquired and stored and later forwarded to another location for clinical evaluation.

Practitioners should also ensure that the telehealth services provided are included on Medicare’s list of allowable HCPCS and CPT codes.18 Not all services that are reimbursable when provided in a face-to-face clinical encounter will remain reimbursable if provided via telehealth technology.

How will CMS enforce these requirements?

OIG has recommended in the report that CMS should conduct post-payment reviews of telehealth claims, but, while CMS continues to use Comprehensive Error Rate Testing (CERT) reviews19 to determine claim error rates, the agency’s comments to the OIG report suggest that there are no plans to undertake any new initiatives related to telehealth claims issues. Unfortunately, these comments also indicate that, despite the fact that Medicare Administrative Contractors will be implementing new telehealth claim edits as a result of this report, there are also no plans to increase the availability of provider training on Medicare’s telehealth requirements.


CMS’s comments demonstrate that, for now, the agency is reluctant to take on new, aggressive enforcement efforts. But while federal regulators may temporarily tolerate telehealth’s growing pains in order to prioritize the expanded access to services that telehealth providers offer, Medicare expenditures on these services continue to grow exponentially, and Telemedicine providers should be prepared for the increased scrutiny that inevitably accompanies industry growth. 

  1. Zion Market Research, Telehealth Market by Component Type (Hardware, Software and Services), by Mode of Delivery Type (Web Based, Cloud Based and On Premise) for Providers, Payers, Patients and Other End Users: Global Industry Perspective, Comprehensive Analysis and Forecast, 2016-2022 (Feb. 10, 2017), available at  
  2.  Anthem and Am. Acad. of Family Physicians’ Robert Graham Ctr., Family Physicians and Telehealth: Findings from a National Survey (Oct. 30, 2015).
  3.  Dep’t of Health & Human Servs., Office of Inspector Gen., CMS Paid Practitioners for Telehealth Services That Did Not Meet Medicare Requirements (April 30, 2018).
  4.  The report stems from OIG’s first project to review Medicare payments for telehealth services, which was added as a supplement to OIG’s annual Work Plan for June 2017. A forthcoming audit, announced in November 2017, will determine whether states’ Medicaid payments for telehealth services were allowable under federal Medicaid requirements. Dep’t of Health & Human Servs., Office of Inspector Gen., Work Plan, Report No. W-00-18-31527; W-00-16-35790, available at
  5.  The report did not specify whether providers selected for audit were required to refund erroneous payments. 
  6.  42 C.F.R. § 410.78(a)(4).
  7.  An MSA is a high-population geographical region, defined by the U.S. Office of Management and Budget as one or more adjacent counties with at least one urban core area having a population of at least 50,000, plus adjacent territory that has a high degree of social and economic integration with the urban core. 75 Fed. Reg. 37246, 37252 (June 28, 2010).
  8.  HPSAs are geographic areas designated by the Health Resources and Services Administration as having shortages of primary care, dental care, or mental health providers. 42 U.S.C. § 254e(a)(1).
  9.  Some of these demonstration projects remain ongoing, and CMS continues to approve new demonstration project grants through the CMS Innovation Center. See Gov’t Accountability Office, Telehealth and Remote Patient Monitoring Use in Medicare and Selected Federal Programs, Pub. GAO-17-365 App’x VII: Examples of Telehealth and Remote Patient Monitoring in Medicare Models and Demonstrations (April 2017).
  10.  42 C.F.R. § 410.78(b)(3)-(4).
  11.  Health Resources and Services Administration, “Medicare Telehealth Payment Eligibility Analyzer,” available at  
  12.  42 C.F.R. § 410.78(b)(2).
  13.  Under Section 1834(g) of the Social Security Act, a CAH may elect to be paid for services furnished to its outpatients under the Optional Payment Method (Method II), whereby the CAH bills Part A for professional services provided by practitioners who have reassigned their billing rights and receives cost-based payment for facility services, plus 115 percent of the Medicare Physician Fee Schedule for professional services. The payment amount for telehealth services is 80 percent of the Medicare Physician Fee Schedule when the distant site physician or practitioner is located in a CAH that elected Method II payment and the practitioner reassigned his or her billing rights to the CAH. Centers for Medicare and Medicaid Servs., Medicare Learning Network, Critical Access Hospital (August 2017), available at
  14.  Ctrs. for Medicare & Medicaid Servs., Medicare Claims Processing Manual, CMS Pub. 100-04, Chap. 12, Sec. 190.7 (Rev. 3873, Oct. 6, 2017).
  15.  42 C.F.R. § 410.78(b).
  16.  42 C.F.R. § 410.78(a)(3).
  17.  42 C.F.R. § 410.78(d).
  18.  Ctrs. for Medicare & Medicaid, Servs., “List of Telehealth Services,” available at Covered services include consultations, office visits, individual psychotherapy, and pharmacologic management.
  19.  The CERT program involves post-payment review of random samples of Medicare Fee-For-Service claims. The program is designed to monitor the accuracy of claim payments by identifying erroneous payments and trends that may be driving common errors. The CERT program may result in a finding of overpayment and recoupment of payment made on one or more claims selected for review, but the limited scope of CERT reviews means that the CERT program cannot label a claim as fraudulent. Ctrs. for Medicare & Medicaid Servs., Medicare Program Integrity Manual, CMS Pub. 100-08, Chap. 12, (Rev. 774, March 2, 2018).

Hal Katz

Husch Blackwell LLP

Hal Katz is a Partner at Husch Blackwell.  He focuses his practice on for-profit and non-profit clients across the country doing business in the healthcare industry.  Mr. Katz concentrates in corporate and transactional matters, such as the purchase and sale of businesses, mergers and acquisitions, start-ups, corporate restructurings, clinical integration, healthcare innovation, and strategic planning.  He is board certified in healthcare law by the Texas Board of Legal Specialization.  He may be reached at [email protected].

Loreli Wright

Husch Blackwell LLP

Loreli Wright is an associate at Husch Blackwell, Shei specializes in healthcare regulatory law and has experience advising clients on licensing and reimbursement issues for emerging practice models, including telemedicine and concierge medicine. She also provides counsel on health facility licensing, and accreditation, healthcare fraud and abuse, and regulatory compliance.  She may be reached at [email protected]