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Telemedicine adoption grows – results of the 2017 Foley Telemedicine and Digital Health Survey [PODCAST]

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The Hospital Finance Podcast

In this episode, Nate Lacktman of Foley Lardner LLP discusses the results of their 2017 Telemedicine and Digital Health Survey. We discuss the the adoption rate of telemedicine among providers and consumers, international opportunities for providers, legal ramifications, and the future of telemedicine.

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Mike Passanante: Hi, this is Mike Passanante. And welcome back to the Hospital Finance Podcast. Today, I’m joined by Nate Lacktman who’s a partner and healthcare lawyer with Foley & Lardner LLP. He’s the chair of the firm’s Telemedicine Industry Team and co-chair of the firm’s Digital Health Workgroup. He advises healthcare providers in technology companies on business arrangements, compliance and corporate matters with particular attention to telehealth, digital health and health innovation.

Nate has joined us to discuss the results of Foley’s 2017 Telemedicine & Digital Health Survey. Nate, welcome to the show!

Nate Lacktman: Thanks for having me, Mike.

First, your firm, Foley & Lardner has recently published this survey. Tell us a bit about the survey and why you conducted it.

Nate: Well, we initially just conducted our first survey in 2014. And the 2017 addition was a way to revisit the results and the data that we got three years ago and see how the industry has changed.

I think we’re the only law firm to have produced a telemedicine or digital health survey. And that’s interesting in and of itself because there are other research surveys and reports out there. But oftentimes, they’re put out by a technology vendor or a platform articulating its own functionalities and benefits. And so, this was agnostic to any type of technology or software.

Another interesting angle is that it focused on executive leadership within hospitals and healthcare provider organizations rather than focusing on surveying CEO’s of telemedicine-only companies. If we focused on the latter, it might skew way heavily to pro-telemedicine. So, what we wanted to do is get the finger on the pulse of how the healthcare industry as a whole is responding to the use of telemedicine and digital health.

Why would a law firm care about that? Well, certainly, some lawyers are there, maybe work with a client, and they say, “This is what the law is and what the law isn’t.” Well, that’s like, in my opinion, kind of like minor league lawyering.

What we want to do really with our telemedicine industry team is offer not just legal advice but solutions based on real world information and insights. And this report gave me personally a lot of answers that surprised me that I didn’t know was going on so widespread in the industry.

For example, when about half of the respondents to the survey said that they record their telemedicine consults, that number was a lot higher than what I was expecting it to be.

So, we get a lot of information and data that we can use to then advise and consult our clients in a more meaningful way.

Personally, I also want to see the industry grow. So I think the more validated or useful data-driven reports that come out there, it can only be better. Even if the report show that utilization of telemedicine is low in an area or they’re skeptical about something, what it does is it provides an objective data point that we can access and then ask why rather than just relying solely on rumors and guessing and conjecture.

Mike: Yeah, it’s a great survey. I’m looking forward to digging into it with you here.

And as you mentioned, you published the previous survey in 2014. And you’ve come back around and looked at the issues again this year. And you did find that perceptions about telemedicine have changed. And as you mentioned, you looked at hospitals, specialty clinics, and other healthcare organizations as sort of your barometer. Tell us about the change in perception.

Nate: Sure! One of the things that really stood out from a difference in the last three years is that, in 2014, when we asked respondents, “Do you expect most of your patients to be using telemedicine services in the next three years?”, 87% said, “No way!”

Now, when they responded, about 75% of them said, “Yeah, we actually now offer or plan to offer telemedicine services.”

So that is a huge swing in attitudes in not just plan perception but actual adoption and implementation in a mere three years.

Although it’s not touched on our survey, other reports that I’ve read still hold that telemedicine and digital health is the fastest growing area within the healthcare industry with analyst projections of venture capital investments and new telemedicine-only companies slated to hit about $7 billion this year alone, to say nothing of the fact of established medical institutions utilizing these services outside of a venture capital space.

In addition, while 53% of our respondents said their telemedicine programs are growing or expanding, that number three years ago was only 34%. They said, oh, their telemedicines are in the early stages. So in those three years, we can see how far telemedicine has advanced.

Mike: And it has advanced, but we still are in the early going. And what was interesting was providers seem to be satisfied with their telemedicine platforms according to the survey. And the survey does go into this into some detail. Can you break that down for us?

Nate: Sure! We see a lot of satisfaction both among the providers that are using telemedicine platforms and among patients that are receiving it.

For example, a metric that I thought was interesting on the patient side in our report, about 33% of our respondents said that once a patient uses telemedicine the first time, they’re 50% likely to use it again. So basically, half of the patients after their very first telemedicine consult, they continue to want to use it.

That is actually I think a high repeat user rate that patients aren’t looking at as a total one-off or they’re incredibly dissatisfied.

Why is that 50% high as opposed to you thinking, “Well, it should be 80% or 90%”? You have to factor in that a number of these telemedicine-based services are specifically designed to be triage or one-off as an alternative to going to an urgent care clinic or the emergency department.

So, you can see that half of those are either one-off, but the other half, they’re using it for continuing services, maybe mental health, chronic care management in a meaningful, sustained way.

When we talk about the providers, the numbers were even more favorable. Seventy-three percent of them said they were satisfied or very satisfied with their organization’s telemedicine program. And only 3% said they were dissatisfied with the organization’s telemedicine program.

What I think that leads to is how different it is than if you were to survey providers on their EMR software. Pretty much, universally, doctors complain about the intricacies and the aberrancy and maze that is an EMR record system. And it shows you how user-friendly and how much time and resource development the telemedicine software companies have put into enhancing the user experience of their platform. They definitely recognize that a telemedicine software cannot be forced upon someone. You really need the buy-in from not just the executive leadership, but you need the buy-in from the providers who use it. And then, if the patients find it confusing or cumbersome, they’re not going to continue to re-use it.

So, that is I think an under-reported or an under-discussed area in telemedicine, is how high of a UX we see in telemedicine software compared to traditional EMR or EHR software.

Mike: That’s a very interesting take and a very good point. It certainly is something that won’t get used if it’s not user-friendly, right? Yeah, that’s a very good point.

And of course, providers are looking for new revenue streams all the time and trying to grow out the services that they provide. And one of the things you touch on in the survey is the idea of international telemedicine. And that is on their radar, isn’t it?

Nate: Absolutely! One of the most powerful aspects of telemedicine technology is that you no longer need to be restricted by geographic boundaries. In my opinion, gone are the days where it’s certainly a wasteful marketing spend of a hospital’s emergency department putting up a sign at a cross street saying, “Oh, our emergency department wait time is 3 minutes” or “15 minutes.”

If you’re going to go the emergency department, typically, you ought not to be planning ahead of time to go to the emergency department. So seeing a sign that the current wait time is 15 minutes, and you’re going to drive there, to me, that just seems kind of a short-sighted or wasteful use of marketing spend.

However, if you use this technology to say, “Well now, we can just market ourselves online or we can port out/export our expertise of our physicians and other providers to hospitals and medical centers and facilities or patients located across the world, that is a phenomenal draw.”

What that does is it allows you to basically increase the utilization or the workload of any given physician on your staff. Maybe they’re only working at 80% capacity because they’re a sub-specialist and not as many patients in the local geography have that particular nuance disease state. But if that doctor is an expert in it, he/she could really use that expertise and treat patients all over the world and not only be 100% busy, but maybe have enough patient volume that it supports hiring a new resident or a fellow and growing that type of expertise in the program.

Those are the seeds of destination medicine programs wherein if a hospital or a specialty group or academic medical center can do it right, the next level is you attract patients from all over the US or all over the world who are coming to you or your surgeons or specialists for one particular thing. And then, you’re basically a global magnet.

And the real world examples of these global magnet are institutions like Mayo Clinic and Johns Hopkins and Sloan Kettering. They’re known for doing exceptional levels of work in certain specialty areas. And patients fly from all over to get treated. Mayo Clinic is located in Rochester, Minnesota. Yes, they may care for the people who live in Rochester, but there’s way more doctors at that facility than are needed to support the local community. And they’re able to use technology and these innovative ways of delivering healthcare to provide care to patients all over the world. That’s exciting.

If we look at the survey data for telemedicine in our report, more than half of our respondents said they’re interested in offering international telemedicine. And of those, more than 80% said they do plan to in fact implement international telemedicine programs within three years.

Now, it’s not necessarily in our report, but I can certainly tell you from the work we do, the countries that folks in the US are most interested in targeting right now are China, the UAE within the Middle East, and then, to a lesser extent, South America.

I think the reasons for this are the explosion in wealth in the middle class in China and the fact that they have very limited access to healthcare under the way that their system is set up. Basically, you have to go to a hospital in China in order to get healthcare. They don’t really have a widespread primary care clinic or physician group model in their country. And now that their citizens have enough money to make choices on where they want to spend their healthcare dollars, they’re looking at the expertise of US physicians and the access and the availability of them.

So really, in the UAE, they may not have the same problem of access to care, but they really highly value the expertise and reputation of US-based medical services providers and they’re willing to pay a premium for that.

And then, you see a number of academic medical centers or groups in Florida, Southern California or Texas that have a lot of cultural similarities and overlap with people living in Central and South America. So that’s already a natural organic draw. And then, they couple that with their specialty services so you see more telemedicine there.

We’re not really seeing it in Western Europe, I think (as in US to Western Europe). I think that may be because their access to care is already more established, notwithstanding the fact that the population may have money to spend on healthcare. I think that they probably just don’t have the same need or perceived need as these other areas of the country.

Mike: And Nate, I’d like to ask you to expand on some of the legal questions around telemedicine that were raised in the survey. Can you talk to us about those?

Nate: Sure! I mean, everyone always asks about licensing. And they always want to say that—they want to try to make an argument that they don’t need to have a license to do what they’re doing. I would say almost every week, we have clients or potential clients trying to lawyer us to convince us that they’re just life coaches and they’re not really mental health professionals because if they were a mental health professional, then they’d need to have a license in the state where the patient is located, and they don’t want to do that paperwork and pay those filing fees.

Universally, my advice is, yeah, there are some professional services that don’t require licensing in certain states. For example, only about 18 states or so require a genetic counselor to be licensed as a genetic counselor in that state. So, you could practice genetic counseling services in a state that doesn’t require a license. You wouldn’t need a license.

But when you’re getting into some of these areas of mental health services, I think you kind of need to own it. What are you selling to the public, the patients? Are you basically advertising mental health services. And if so, if that’s within the scope of practice of what requires a license in the state where the patient is located, just get the license. It’s not that much of an excuse of why you didn’t do it.

We see that. We see a lot of questions on prescribing drugs via telemedicine. So before you can prescribe a drug via telemedicine, you have to establish a valid doctor/patient relationship. Okay, fine. You can do that via telemedicine in every state today which is a great thing.

The question that people have is “Well, what type of technology are we required to use?” And we call that the modality of the communication. Real time audio/video is still most widely considered the gold standard for telemedicine services, but states are increasingly allowing the concept of interactive audio, which is where the doctor would review the patient’s medical records, and then do a phone call with the patient.

And more of them are allowing storing-forward, or asynchronous wherein there would be no video consult or telephone discussion between the patient and the doctor. About 12 to 15 states right now expressly allow asynchronous telemedicine to be used to create a valid doctor-patient relationship.

Now, as you have that established, you have to take a look at prescribing laws—and that’s not just medical board, but that’s pharmacy board. And so when you get to prescribing, it is more restrictive.

For example, a state might allow you to use asynchronous telemedicine to create the relationship. But then if you’re issuing a prescription medication, that needs to be done interactive audio or audio/video. And then, they get more restrictive for controlled substances.

And controlled substances also implicate federal law, namely the Ryan Haight Act and the DEA regulations. There’s a number of exceptions for telemedicine to them. But the shorthand for direct-to-consumer type of service wherein you would never have an in-person exam with a patient, and you’re going to prescribe controlled substances, the Ryan Haight Act is going to be an obstacle and a burden that would probably inhibit most of that.

Finally, people also really have a lot of questions about their business models. And they may really be selling medical services via telemedicine, but trying to characterize themselves as a technology company because they’re run not by doctors, but really by non-physician entrepreneurs.

And there’s a concept called the Prohibition on the Corporate Practice of Medicine which exists in about half the states. And what that does is it would require the telemedicine entrepreneur company to really have a separate medical group owned by a physician. That’s how the big companies like TeleDoc or American Well or what-not, they’re structured through an affiliated medical group in addition to their technology company.

So, we see a lot of these different complexities and issues that are fairly unique to the telemedicine environment. And then, when you need to spread that to use the power of telemedicine to move beyond geographic borders, then you need to account for laws of all 50 states or at least all the different states in which you want to operate.

And that I think is the biggest source of confusion or frustration. And so I know when we work with our clients, we’re able to provide those kinds of solutions because we’ve spent the time to think about it and develop it. And that’s why it’s more than just sort of saying, “Here’s what the law is. And here’s whether an in-person exam is required or not.” You really need to fold in all these different areas.

And then, when you’re offering a direct-to-consumer service, you have to factor in all of the ecommerce considerations like terms of use and online privacy policies and payment processing and what those rules are.

So, I feel for the entrepreneurs out there. They may get overwhelmed. They may focus on one little aspect and feel like they’re drinking from a fire hose. But if you’re going to build out a company, I think you should build it right. And these are some of the legal issues that are still pressing on telemedicine industry providers.

Mike: Yeah, and certainly the other half of that is can you get paid for it. So let’s talk about reimbursement for telemedicine because it seems like that landscape is improving. Tell us what you found.

Nate: Yeah, I think that our respondents, when we ask them what was the biggest challenge to implementing telemedicine at their organization, 59% said lack of third-party reimbursement. So overwhelmingly, that was the number one barrier that they have identified. I think that’s true, primarily on the Medicare side.

We’re seeing a lot more traction among state laws passing so-called telehealth commercial insurance coverage statutes, which essentially require a health plan to pay for telemedicine services if that plan would pay for an identical service when delivered in person.

It’s really a consumer rights issue, right? If I pay my health plan $1000 a month premium, and in exchange, my plan says, “Alright, Nate, I’ll cover these 50 services for you,” I find it arbitrary if the plan says, “Oh, no… you have to get them in person. I’m not going to cover them if you get it via telemedicine” when it’s clearly an established and legitimate, bona fide way of receiving medical care.

So, there is a lot of confusion and frustration on that part because the providers who want to invest in the technology and offer the services can’t really force the hand of the health plans to make them cover it.

And historically, the early adopters of telemedicine have been ERISA plans or employer-funded plans where the employer gets to make that choice. And that’s all well and good. But it’s a slight of hand to use the ERISA plan decisions as a proxy for health plans as a whole. Once you get into the real commercial health plans, third-party, you definitely see less coverage than you do for some of these ERISA plans unless the state passes the law requiring the plan to cover it.

So, that is changing as well. More and more states are passing these laws. Or if they passed the law, that was like a weak or watered down version. They’re revisiting it and realizing the error that they made in the legislative language.

In addition, I think we’re seeing an uptick—and you’ve probably seen this in some of your prior interviews—adopting retail medicine and patients embracing it out of the sheer convenience and satisfaction and access and immediacy, the on-demand immediacy they can get from a telemedicine service. They’re willing to pay out of pocket even if they have health insurance.

And the retail prices can even be lower than what the patient would pay or they certainly could be about equal to their co-pay for a covered service because the provider doesn’t have to have absurd overhead for administrative expenses of claims filing and claim denials and reimbursement appeals that invariably happens with any provider submitting claims for reimbursement to a health plan.

So, when I talk to our clients about telemedicine, I don’t like to use the word reimbursement because to me that suggests the government paid fee for service methodology. I really like to encourage our client to think in terms of revenue because there are so many sources of payment out there for telemedicine services, whether it’s patient pay or B2B contracts, cost savings, at risk contracts that have nothing to do with the fee for service-based payment from Medicare/Medicaid which is very different from, historically, how our traditional healthcare system has operated.

They’ve been so singularly focused on Medicare and Medicaid payments that I think telemedicine really presents not only an opportunity but a challenge for the executives and entrepreneurs to wrap their head around the idea that there are different and better ways of doing things with regard to healthcare revenue financing.

Mike: And Nate, given what you found in the 2017 survey, what do you think is next for telemedicine?

Nate: I think we’re going to see some continued growth. We’re not going to see Bitcoin level increases over the next couple of weeks. But I certainly think that we’re going to see—and I hope to see—providers and patients continue to embrace the technology.

But if I have to put on my predict-the-future and look-into-the-crystal-ball, what I think we’ll see in the next three years is an increase of mergers and acquisitions, M&A activities among these different telemedicine companies, whether they’re the provider groups or software.

Right now, there’s a lot of great ideas out there and a lot of companies. And we’re going to see who [stands out] to kind of take the helm and move to the front of the race.

And we’re already seeing some strategic M&A activity within the telemedicine space. And I think we’re going to continue to see it so there’ll be a bit of a consolidation.

I think also that, as we get more of these telehealth commercial insurance laws passed, we’ll see traditional providers, like maybe just a regular primary care group or what-not, now that coverage is available, they will use the software and provide it to their own patients.

So that may portend a market share decrease in some companies like TeleDoc, let’s say. It’s very hard to predict. I think the companies like TeleDoc that are focused on a B2B model may have some traction on the life of their contract. But I like other companies that are focused on really getting in network with the health plans or Medicaid MCO’s, establishing themselves as a bona fide medical services provider and becoming available to the members of those health plans just like any other doctor in network. Then they become woven into the fabric of the health plan’s provider network and they’re available as a really polished turnkey solution when patients want to reach out for telehealth services.

So, those would be my few predictions over the next three years on telehealth medicine and the digital health and technology side. The FDA, just yesterday, put out three documents of guide talking about regulation of softwares and medical devices.

The gist of it is I think we’ll see less regulation on digital health software that is used as a tool by clinicians and doctors because the FDA recognizes the expertise of the treating clinician when using it as a tool. And because there is that clinical involvement and oversight, the FDA is likely to feel more comfortable that the software itself need not be regulated in the same manner as software that does all the diagnostics or decisions itself.

What does that mean? It means that the more powerful this AI augmented software in healthcare becomes, the more likely it is to be deemed to be a regulated medical device by the FDA.

And I think that the developers in the digital health space might have wanted to see more hands-off by the FDA or a differentiation between low and high risk clinical applications. I think if you’re a healthcare provider or a developer making tools for healthcare providers to use, you would really embrace that guidance because you say, “Well, great, now I might not need to go through an FDA regulatory process. I can just focus on building a great tool that a doctor or a nurse will use as a way to apply their professional skills and independent medical decision-making.

So I like that balance. I think that’s what we’ll see in the digital health side.

Mike: So Nate, if someone wanted to get a copy of the survey we’ve discussed today, or they’d like to find out more about you, how can they do that?

Nate: Sure! They could go to Foley.com/telemedicine. And that’ll direct them to our Telemedicine Industry Team. There are tons of resources out there, information. You can find the report, see the people on our team and everything and as well as our prior presentations and articles.

The other place they could look for telemedicine law and business articles is our blog, HealthcareLawToday.com. There’s probably about a hundred telemedicine/telehealth articles out there including a lot of state-specific information.

And then, finally, they could follow me on Twitter, @Lacktman, which is all telehealth law through my Twitter feed.

Mike: Nate Lacktman, thanks so much for joining us today on the Hospital Finance Podcast.

Nate: Thank you for having me, Mike. It’s been a pleasure.

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