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Digital Health Business Strategy: A Careful Balance

by Dale C. Van Demark | Feb 19, 2020 | General Interest, Telehealth

When it comes to market success for digital tools in the health sector, business strategy can be far more complex than in other industries. Understanding customer-driven market trends is important, but healthcare’s complexity can camouflage customer demand and its regulatory ecosystem adds layers of additional considerations.

Customer Demand and Digital Solutions

The convenience, competitive pricing, answers-at-your-fingertips responsiveness and hyper-personalization delivered by top technology brands and their integration into other industry sectors has created an expectation for digital health solutions that deliver the same experience.

In some instances, consumers are finding the solutions. For example, telemedicine is gaining momentum as consumers discover that digital interactions with high-quality providers are oftentimes more convenient and less expensive than face-to-face encounters. Other tools are providing access to prescriptions, better health condition management solutions, better information sharing enabling smoother transitions among care settings, and more efficiency in everything from hospital operations to scheduling appointments to identifying in-network care options.

When it comes to business strategy, however, digital health solutions need to recognize that consumer pressures are frequently at odds with existing incentives within care delivery systems and, perhaps legal and regulatory requirements. Accordingly, it is critical not just from a compliance perspective but also from a business strategy perspective to navigate the healthcare industry’s unique market and regulatory dynamics.

Balancing Demand with Reality
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US Office of Management and Budget Calls for Federal Agencies to Reduce Barriers to Artificial Intelligence

by Bernadette M. Broccolo | Jan 17, 2020 | Big Data, Consumer Protection, Data Privacy, Telehealth

On January 7, 2020, the Director of the US Office of Management and Budget (OMB) issued a Draft Memorandum (the Memorandum) to all federal “implementing agencies” regarding the development of regulatory and non-regulatory approaches to reducing barriers to the development and adoption of artificial intelligence (AI) technologies. Implementing agencies are agencies that conduct foundational research, develop and deploy AI technologies, provide educational grants, and regulate and provide guidance for applications of AI technologies, as determined by the co-chairs of the National Science and Technology Council (NSTC) Select Committee. To our knowledge, the NTSC has not yet determined which agencies are “implementing agencies” for purposes of the Memorandum.

Submission of Agency Plan to OMB

The “implementing agencies” have 180 days to submit to OMB their plans for addressing the Memorandum.

An agency’s plan must: (1) identify any statutory authorities specifically governing the agency’s regulation of AI applications as well as collections of AI-related information from regulated entities; and (2) report on the outcomes of stakeholder engagements that identify existing regulatory barriers to AI applications and high-priority AI applications that are within the agency’s regulatory authorities. OMB also requests but does not require agencies to list and describe any planned or considered regulatory actions on AI.

Principles for the Stewardship of AI Applications

The Memorandum outlines the following as principles and considerations that agencies should address in determining regulatory or non-regulatory approaches to AI:

Public trust in AI. Regulatory and non-regulatory approaches to AI need to be reliable, robust and trustworthy.
Public participation. The public should have the opportunity to take part in the rule-making process.
Scientific integrity and information quality. The government should use scientific and technical information and processes when developing a stance on AI.
Risk assessment and management.A risk assessment should be conducted before determining regulatory and non-regulatory approaches.
Benefits and costs. Agencies need to consider the societal costs and benefits related to developing and using AI applications.
Flexibility. Agency approaches to AI should be flexible and performance-based.
Fairness and nondiscrimination. Fairness and nondiscrimination in outcomes needs to be considered in both regulatory and non-regulatory approaches.
Disclosure and transparency. Agencies should be transparent. Transparency can serve to improve public trust in AI.
Safety and security. Agencies should guarantee confidentiality, integrity and availability of data use by AI by ensuring that the proper controls are in place.
Interagency coordination. Agencies need to work together to ensure consistency and predictability of AI-related policies.

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Challenges and Opportunities in MedTech, Innovation and Digital Health

by Stephen W. Bernstein and Sharon Lamb | Jan 10, 2020 | Big Data, Data Privacy, Telehealth

A recent McDermott roundtable on European health private equity generated key insights into the future of medtech, digital health, and data analytics, and identiﬁed opportunities for companies and investors.

Digital health solutions are widely considered to be the next big growth market. Healthcare lags signiﬁcantly behind other industries when it comes to digitization, but the potential opportunities are driving developers, healthcare providers, and investors to ﬁnd solutions.

PATIENT CARE
A key point to bear in mind about healthcare technology is that success and adoption may often be measured by the quality of the users’ experience, the resulting clinical outcomes, short and long term cost savings, and the resulting margin for both investors and the health care system at large. These multi-faceted goals are best illustrated by the demands for i) greater efficiency, and ii) better patient outcomes.

Efficiency is typiﬁed by, for example, streamlined bookings and appointment reminders, algorithms that triage patients to ensure they are seen by the right person at the right time, and in-home patient monitoring after patients are discharged. Patient take-up is also an excellent gauge of efficiency, for example, a high tech product that measures and reports blood sugar is of no value if the interface is too complicated for an older population.

Better outcomes result from clinicians gathering and using data to determine the right treatment in the fastest possible time, and are demonstrated, for example, by permanent lifestyle changes, improvements in self-care or care outside hospital,accurate drug dosage and use of medicines, and, in direct contrast with other sectors, reduced, rather than increased, service usage.

PRIVACY AND REGULATORY HURDLES
One of the most obvious challenges inherent in digital health is data privacy and security. Stemming from that are issues relating to control of the data, the right to use it, and ownership of the analysis. The most successful companies are those that, from the very beginning, understand the regulatory landscape in which they are operating; are transparent in terms of where their data comes from; make clear the type of data at issue, be that identiﬁable, pseudonymized, anonymized, or something in between; and identify who will control what data in what form. The ability to marry up these factors is a key part of any new entrant’s value proposition.

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New Laws Expand Telehealth in California

by Lisa Mazur | Nov 1, 2019 | Telehealth

California Governor Gavin Newsom recently signed into law two bills that expand the delivery of telehealth services in the state. In particular, the legislation:

Permits providers to prescribe medications without a synchronous interaction
Requires payment parity of telehealth services under commercial plans
Loosens restrictions on Medicaid coverage of store-and-forward services.

California healthcare providers and commercial health payers should consider the following key takeaways from these laws.

Remote Prescribing

Assembly Bill No. 1264 (codified at Cal. Bus. & Prof. Code § 2242(a)) took immediate effect on October 11, 2019. This provision alters the standard for prescribing, dispensing and furnishing dangerous drugs (including any prescription medication):

Such drugs may be prescribed, dispensed and furnished as long as there is an “appropriate prior examination and a medical indication.”
The law specifies that the appropriate prior examination “does not require a synchronous interaction” (e., real-time communication) and can be administered via telehealth as long as the provider abides by the appropriate standard of care.
The provision expressly identifies certain asynchronous technologies, including questionnaires and self-screening tools, that are permissible methods for conducting the prior examination.

Previously, the law required an “appropriate prior examination” but gave no detail regarding what that examination entailed. The new provision provides clarity and enables providers to use innovative solutions such as dynamic questionnaires when prescribing medications to patients.

Payment Parity

Although California previously required certain insurers (including commercial payers and Medi-Cal managed care plans) to cover telehealth services, it did not specify that telehealth services have to be reimbursed at the same rate as in-person care. Assembly Bill No. 744 changed that with its addition of two new statutes: Cal. Health & Safety Code § 1374.14 and Cal. Ins. Code § 10123.855. These new provisions do not require reimbursement parity for Medi-Cal managed care plans, however.

These statutes incorporate the following provisions for contracts that are issued, amended or renewed on or after January 1, 2021:

Commercial payers must reimburse services appropriately delivered through telehealth “on the same basis and to the same extent” as the services are reimbursed when provided in person.
Insurers and providers retain the ability to negotiate reimbursement rates, but healthcare services that are the same, “as determined by the provider’s description of the service on the claim,” will be reimbursed at the same rate, whether provided in person or through telehealth.
Telehealth services offered by an out-of-network provider do not need to be covered by a health plan or insurer, unless required under other provisions of law.
Insurers can establish copayment or coinsurance requirements for telehealth services if they do not exceed the copayment or coinsurance for in-person services. However, cost sharing is not required for telehealth services.
Telehealth reimbursement does not need to be separated from other capitated or bundled risk-based payments.
Insurers cannot limit coverage only to corporate telehealth service providers.

Medicaid Coverage of Store and Forward

Previously, Medi-Cal only permitted certain services to be delivered via store [...]

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Vetting Relationships for Telemedicine Collaborations

by Lisa Mazur | Sep 13, 2019 | Telehealth

As the telemedicine regulatory and reimbursement environment becomes more cohesive and providers and patients alike embrace technology, opportunities for telemedicine collaborations are likely to grow. Like any collaboration, finding the right partner is crucial for success, particularly at the highly-scrutinized intersection of healthcare and technology. This post explores the factors to address when evaluating service providers and vendors for your next telemedicine collaboration.

Service Provider Evaluation

Ask around “town” – What is the collaborator’s reputation? What independent feedback is provided in references?
Determine if the service provider’s stage in the organizational “life-cycle” and its affiliated relationships are the best fit for the strategic goals of your partnership (e.g. should you partner with an early-stage company or a longstanding organization?)
Assess the capabilities of potential collaboration partners for meeting your organization needs, and pressure test their ability to come up with back-up options, should the need arise throughout the course of the collaboration.
Determine whether collaborator has state specific and service specific policies and procedures governing the provision of telemedicine services, including: (more…)

Telemedicine Collaborations and Partnerships: Key Considerations for Success

by Lisa Mazur | Aug 30, 2019 | Telehealth

Telemedicine collaborations, whether between technology companies and providers, health systems and patients, or other creative partnerships we have yet to see in the industry, can present numerous benefits to our healthcare delivery system and patient outcomes. However, such collaborations present a variety of regulatory, logistical and operational concerns that should be strategically addressed from the ideation stage of the collaboration onward.

Early-Stage Considerations

The strategy behind the collaboration should be developed with an eye towards the duration of the relationship and the development of mutually beneficial goals and objectives that are clear and measurable. Each party should be transparent about their capabilities and strategic vision at the outset of the collaboration talks to avoid any surprises or disappointments deeper in the future. Questions for potential collaboration partners include:

Is this an experimental partnership or a long-term plan?
What do I bring to the table? How can this partner supplement or support my capabilities?
How will this relationship be branded and marketed? Do I need greater visibility than my partner, or will we come together under a new brand?
Do we have the IT infrastructure and vendor relationships in place to execute this collaboration? If not, how will secure what we need?
Do we have the resources to meet the regulatory requirements of the partnership?
How will we measure the success or failure of the collaboration?

Considerations in the RFP Stage

After the initial strategy discussions have taken place, the proposal period raises its own series of considerations. After ensuring that the arrangement proposed can address the goals and objectives of the collaboration, regulatory and transactional issues take center stage. Rights and responsibilities of each party, reporting and compliance mechanisms, fees, credentialing, licensing and privacy compliance and liability issues, to name a few concerns, are addressed at this point in the process. Fees structures and compliance with the evolving federal and state laws regulating telemedicine providers are particularly complex issues that should be addressed at this point.

Questions to address regarding fees include:

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DOJ Continues Telemedicine Enforcement in Q2 2019

by McDermott Will & Emery, Amandeep S. Sidhu and Marshall E. Jackson, Jr. | Aug 27, 2019 | Telehealth

During the second quarter of 2019, DOJ continued its focus on enforcement activity in telemedicine. As reported in prior editions of the Quarterly Roundup, telemedicine is an expanding field, causing DOJ to pay particular attention to the industry.

In April 2019, DOJ indicted the owner and operator of 1stCare MD and ProfitsCentric with one count of conspiracy to pay and receive kickbacks. The defendant’s arrest and federal indictment is part of a nationwide law enforcement action, as reported in the Q1 2019 Quarterly Roundup, that targeted 24 defendants involved in alleged extensive healthcare fraud schemes focused on telemedicine and durable medical equipment (DME) marketing. These schemes allegedly resulted in losses amounting to more than $1.2 billion. The indictment alleges that from 2016 to 2019 the defendant defrauded HHS in its administration and oversight of Medicare by conspiring with others by paying and receiving kickbacks and bribes in exchange for doctors’ orders for DME for Medicare beneficiaries. Prosecutors also alleged that the defendants, 1stCare MD and ProfitsCentric, through their network of doctors, generated thousands of doctors’ orders for DME absent a pre-existing doctor-patient relationship and a physical examination, and that the orders were based solely on a short telephone conversation. The indictment alleges that these activities resulted in the submission of approximately $40 million in fraudulent Medicare claims for DME.

Further, in July 2019, DOJ indicted a New York-based anesthesiologist for her alleged role in a $7 million telemedicine conspiracy to fraudulently bill Medicare, Medicare Part D plans and private insurance plans, resulting in more than $3 million in payments on those claims.[51] According to DOJ, the indictment resulted from investigative work by the Criminal Division’s Medicare Fraud Strike Force, a joint initiative of DOJ and HHS. Eastern District of New York prosecutors charged the anesthesiologist with one count of conspiring to commit healthcare fraud by misusing telemedicine channels under agreements with unidentified companies to prescribe DME and drugs to more than 3,000 Medicare beneficiaries. The indictment alleges that, from January 2015 to May 2018, the anesthesiologist and other providers allegedly received kickback payments from unidentified companies for improper telemedicine encounters. The indictment alleges that the anesthesiologist “prescribed and ordered DME and prescription drugs for beneficiaries who were not examined or evaluated by a licensed physician.” The prosecutors alleged that the prescriptions flowing from the alleged telemedicine encounters were for DME and drugs that were neither medically necessary nor the result of genuine physician-patient relationships.

PRACTICE NOTE: Given DOJ’s recent criminal enforcement related to telemedicine, telemedicine companies should closely review their compliance with the federal and state laws that may be implicated through a telemedicine practice. Further, DOJ’s focus on individual accountability is particularly important with respect to telemedicine, given its interest in pursuing criminal actions against physicians.

This blog post was originally published in McDermott’s Health Care Enforcement Quarterly Roundup | Q2 2019. Click here to view the full report.

Dash to Digital Health? How the Regulatory Sprint to Coordinated Care Could Expand Access to Care

by Dale C. Van Demark and Lisa Mazur | Jul 22, 2019 | Telehealth

Certain long-standing laws, such as the civil monetary penalty provision prohibiting patient inducements, have hampered providers’ ability to fully leverage remote patient monitoring and other telehealth tools. Many stakeholders are hoping that developments in the Regulatory Sprint to Coordinated Care will begin the rulemaking process to enable greater access to digital health and virtual care products.

The US Department of Health and Human Services (HHS) launched the Regulatory Sprint to Coordinated Care in 2018 with the goal of reducing regulatory burden and incentivizing coordinated care. As part of this initiative, the Centers for Medicare and Medicaid Services and other agencies are scrutinizing a variety of long-standing regulatory requirements and prohibitions to determine whether they unnecessarily hinder the innovative arrangements policy-makers are otherwise hoping to see develop. While regulations such as the civil monetary penalty prohibition on patient inducements have significant benefits for reducing fraud and abuse, they can also make it difficult for health systems to deploy digital tools that help patients track, monitor and share health data with their providers.

For example, Medicare reimbursement of digital health and virtual care products, while expanded in 2018, is still limited. This means that if a provider wants to use un-reimbursed technology, the provider must either charge the patient separately for the non-reimbursable service or provide the service to the patient for free. The former option is tricky—it can result in surprise charges for patients, and digital health services can be part of a care service plan and difficult to break out separately as a standalone billable service. As a result, many providers would prefer to offer virtual care services to the patient for free, but doing so immediately implicates the civil monetary penalties prohibition. Substantial time, effort and cost is required to evaluate the facts and circumstances, understand the available regulatory guidance and case law, and determine whether the provision of the service—which results in no increase in revenue—could result in governmental scrutiny

This is just one example of how certain long-standing regulations have become a barrier to broad adoption of digital health. If HHS chooses to update these regulations or issue additional guidance, the Regulatory Sprint to Coordinated Care could bring digital health technologies such as telehealth and virtual care products off the sidelines and into the race.

CMS Innovation Center Proposes Telehealth Solutions in ET3 Model

by Lisa Mazur | Jun 27, 2019 | Telehealth

As part of its efforts to provide patient-centered care and reduce costs for Medicare beneficiaries, the Centers for Medicare and Medicaid (CMS) have developed an Innovation Center model for ambulance care teams: Emergency Triage, Treat, and Transport (ET3). As part of this model, the agency has proposed two potential telehealth offerings: 1) An individual who calls 911 may be connected to a dispatch system that has incorporated a medical triage line to be screened for eligibility for medical triage services prior to ambulance initiation, and 2) telehealth assistance via audiovisual communications technologies with a qualified provider once the ambulance arrives.

Key participants in the ET3 model will be Medicare-enrolled ambulance service suppliers and hospital-owned ambulance providers. In addition, to advance regional alignment, local governments, their designees or other entities that operate or have authority over one or more 911 dispatches in geographic areas where ambulance suppliers and providers have been selected to participate in the ET3 model will have an opportunity to access cooperative agreement funding. As such, both state regulations and CMS regulations will apply to the use of telehealth offerings under ET3. This post explores early-stage questions of ET3 implementation and reimbursement, the intersection of state laws governing telehealth, and what potential participants and telehealth companies should know about the program.

How will CMS support the ET3 model implementation?

The key telehealth development for the ET3 program is that CMS expects to waive the telehealth geographic and originating site rules as necessary to implement the model, including waivers that will allow participants to facilitate telehealth at the scene of a 911 response. Additional information on these waivers is expected to accompany the ET3 Request for Applications (RFA), slated for release this summer. Overall, Medicare coverage requirements provide that the patient must be in an approved originating site at the time of the telehealth visit (e.g., hospital) and must be located within a rural area. CMS has waived these two requirements for other programs, such as the SUPPORT for Patients and Communities Act (the SUPPORT Act) in October 2018, which eliminated the originating site restriction for substance use disorder treatment, because doing so is necessary for these programs to succeed.

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DOJ’s Enforcement Activity Against Individuals: Acute Focus on Telemedicine

by Amandeep S. Sidhu, James A. Cannatti III and Theodore Alexander | May 6, 2019 | Telehealth

DOJ’s focus on individual accountability is particularly important with respect to telemedicine. Telemedicine is a burgeoning field, with a projected market increase of 18 percent annually over the next six years, reaching $103 billion in 2024. In light of this recent surge in profitability, DOJ has begun paying extra attention to telemedicine, with at least one recent HHS-OIG report asserting that more than one-third of all telemedicine claims are improper.

The report’s claim is further supported by a recent increase in telemedicine prosecutions. In April 2019, DOJ announced charges against 24 defendants, including owners of various telemedicine companies, for their alleged involvement in a health care fraud scheme resulting in $1.2 billion in loss. This scheme involved the payment of kickbacks and bribes by durable medical equipment (DME) companies to medical professionals working with telemedicine companies, in exchange for the referral of Medicare beneficiaries. DOJ alleges that the defendants paid doctors to prescribe medically unnecessary DME without ever seeing patients or after only a brief telephone conversation. The prosecution involves charges in at least seven districts across the United States, including New Jersey, Florida, Texas, Pennsylvania, and California. Additionally, DOJ prosecuted several other individuals in connection with unrelated telemedicine schemes in late 2018 (see the agency’s press releases here, here and here). In light of this recent trend, companies should exercise extreme caution and consult with regulatory experts prior to opening telemedicine practices. Companies can expect to see increased scrutiny and further prosecution of telemedicine companies moving forward.

Practice Note: DOJ has recently re-emphasized its willingness to exercise significant discretion and reward companies that invest in strong compliance programs. Looking forward, health care companies should maintain detailed and up-to-date documentation of all compliance programs, in case such an FCA case should arise. A lawyer should be consulted if an updated compliance program is needed.

This blog post was originally published in McDermott’s Health Care Enforcement Quarterly Roundup | Q1 2019. Click here to view the full report.