Published May 22, 2020

Telemedicine True-Up: Provider Pricing Post-Pandemic

After COVID-19, many people may never seek some of their medical care in the same manner. COVID-19 has driven numerous patients to use telemedicine to protect themselves and their families from possible exposure in settings such as a physician office. And, as a result, most major insurance companies, after the start of COVID-19, have decided to offer subscribers access to telemedicine (at least temporarily) as an alternative to the traditional office visit.

Although many hospitals have already implemented telemedicine programs in their emergency departments and intensive care units, the use of telemedicine for routine office visits is new for most Americans. Even patients without insurance can log into certain hospital or other ambulatory provider websites/portals and access telemedicine care for a price. But how does a hospital or provider set this price, and how will the influx of providers across the country and demand for services potentially impact future pricing?

Valuing Telemedicine Services

In brief, appraisers of telemedicine arrangements generally consider a combination of the market and cost approaches. The market approach is a valuation approach in which market data is analyzed to determine the actual price paid for a given service in the marketplace. Put more simply, the market approach is a look at what others are paying for similar services, making adjustments when appropriate for the actual facts and circumstances being valued. Thus, when determining what patients should pay for telemedicine services, hospitals or ambulatory providers could research what others are paying in their market for similar services. Providers may also consider what a commercial insurance company or Medicare would reimburse for a similar in-office service or the telemedicine service itself.

The cost approach is a general way of determining the value of a service by estimating the cost to replace that service. In this example, a provider would determine the cost of employing an appropriate number of physicians to support a telemedicine program, in addition to equipment costs and implementation costs, to name a few. A price could then be set to offset the costs of providing services, while delivering a reasonable return on investment.

Pricing and Demand for Telemedicine Services

As COVID-19 advances the use of telemedicine services, it is likely that future demand for such services will increase, resulting in additional telemedicine providers entering the market. With greater demand and more providers involved with telemedicine, the price patients pay for such services may become more competitive and/or commoditized. Additionally, if significant legislative action is taken and regulatory changes made, the loosened governmental regulations on telemedicine during COVID-19 could become permanent. At least one insurer, BlueCross BlueShield of Tennessee, has announced it will make telehealth coverage available even after COVID-19 is behind us. If such actions are taken and others follow suit, it may become easier for providers to receive reimbursement for telemedicine services, further increasing the supply of providers willing to furnish telemedicine care and also increasing patient access to care.

Before COVID-19, the telemedicine industry was projected to grow from a $38.3 billion industry in 2018 to $130.5 billion in 2025. However, no one knows what these numbers could look like now that COVID-19 has changed the way people view access to medical care. Despite the economic challenges and disruptions to standard medical processes brought on by COVID-19, the government and payers have been forced to recognize the value of implementing and reimbursing for telehealth services. Increased acceptance and implementation of telehealth services could also help address the U.S. provider shortage and increase patient access to providers.

If you have questions related to telehealth pricing and reimbursement, or would like additional guidance related to COVID-19, visit our COVID-19 hub, or contact one of our PYA executives below at (800) 270-9629.

Disclaimer: To the best of our knowledge, this information was correct at the time of publication. Given the fluid situation, and with rapidly changing new guidance issued daily, be aware that some or all of this information may no longer apply. Please visit our COVID-19 hub frequently for the latest updates, as we are working diligently to put forth the most relevant helpful guidance as it becomes available.

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