Author: Luis Argueso

On October 26, 2017, President Trump declared that opioid addiction represented a “public health emergency,” as reported by the Wall Street Journal. Concurrent with this declaration, the administration outlined steps that it would take to ameliorate the harm caused by the opioid crisis. One such step involves expanded access to telemedicine services, including the prescription of anti-addiction medication, such as naloxone, to reduce barriers to treatment. The American Telemedicine Association has stated that, “Allowing physicians to prescribe controlled substances by telemedicine…is a very positive move and one that will certainly help more patients to access high-quality treatment.” The American Society for Addiction Medicine echoed this message in a press release lauding the declaration. To date, controlled substances can only be prescribed through face-to-face consultations, unless very stringent exceptions are met. These initiatives represent a continuation of proposed priorities identified in the 2017 budget for the Department for Health and Human Services, which established $1 billion in new mandatory funding over the next two years for the Substance Abuse and Mental Health Services Administration to combat prescription drug abuse and heroin use.

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As barriers to telemedicine services are reduced and funding is expanded, hospitals may seek to engage behavioral health providers to secure coverage for patients in the community, particularly in markets exhibiting a shortage of qualified providers. Given technological advancements and the ongoing shortage of certain physician specialties, especially in rural areas, HAI has observed an increasing trend in the quantity of service contracts between hospitals and telemedicine service providers.

Telemedicine service contracts may implicate the Stark Law, Anti-Kickback Statute, and the Internal Revenue Code, thus requiring compensation arrangements to have terms that are commercially reasonable and/or compensation that is consistent with fair market value (FMV). As these arrangements are relatively new to the healthcare marketplace, there is limited market data available regarding compensation benchmarks specific to telemedicine services. Furthermore, we have observed wide variation in the payment mechanisms for telemedicine services, including but not limited to:

  • Payment per consult
  • Payment per day of coverage
  • Tiered annual payment based on actual consult volume

Existing valuation approaches for other “per procedure” and “per diem” payment arrangements in the marketplace may not necessarily capture the nuances of telemedicine coverage. Therefore, hospitals and health systems should exercise caution when establishing FMV compensation given the unique nature of telemedicine services.

With nearly two decades of valuation experience in the healthcare industry, HealthCare Appraisers keeps abreast of the latest innovations of healthcare delivery to maintain our position as the market leader in healthcare valuation. HealthCare Appraisers’ experience and relationships with key participants in the telemedicine industry position us to provide unique insight to ensure your telemedicine arrangements satisfy commercial reasonableness and FMV requirements.

FMV Pitfall: As telemedicine service arrangements proliferate in the healthcare marketplace, hospitals and health systems must ensure that such arrangements are commercially reasonable and the compensation under such agreements is consistent with FMV. Given the brief history of such arrangements, FMV analyses require experience and insight specific to the telemedicine industry.