U.S. Telemedicine Policy Fully Liberalized: Elimination of In-Person Visit Requirement Marks Industry Milestone, Reimbursement Remains Key Challenge

Texas Governor Greg Abbott

On May 27, 2017, Texas Governor Greg Abbott signed the state’s telemedicine legislation (namely Senate Bill SB1107 and House Bill HB2697), repealing the requirement that physicians could only provide telemedicine services after an in-person consultation with the patient.

As the last of the 50 U.S. states to repeal this regulation, Texas’s passage of its telemedicine bill has enabled a host of telemedicine companies—including Teladoc, American Well, Doctor on Demand, and MD Live—to expand their video consultation services to the nationwide market.

However, strictly speaking, telemedicine operations in Arkansas and Idaho remain limited, as both states continue to impose restrictions on telephone-based telemedicine services.

Texas is the second-largest state in the United States and the largest state in the American South.The passage of this bill is significant not only because it opens up a new market for telemedicine, but more importantly, because it enables the people of Texas to access a more diversified range of medical services.. In addition, this legislation marks the end of more than two years of litigation between Teladoc and the Texas Medical Board, becoming a landmark antitrust case in the U.S. healthcare industry.

At this historic moment, the internet healthcare news website MobiHealthNews reviews the journey of the Texas telemedicine law.VCBeat (WeChat ID: vcbeat) has compiled this article for you, offering an in-depth look at the history and evolution of the legislation, as well as its significance for Texas, the telemedicine industry, and the United States as a whole.

Texas has a large rural population living in poverty, and telemedicine can provide these individuals with much-needed medical services. From this perspective, it should not have been the last state to approve telemedicine services.

Teladoc CEO Jason Gorevic stated, “There are 35 counties in Texas with no family physicians. While the state’s population growth rate ranks first nationwide, its per capita number of primary care physicians ranks fifth from the bottom. Access to healthcare services remains a persistent and significant challenge in Texas.”

Dallas-based Teladoc has been operating in Texas since 2005.However, in 2010, the Texas Medical Board adopted an amendment to its prescribing rules for telemedicine, requiring physicians to conduct an in-person consultation with patients before providing telemedicine services.

The Medical Board and telemedicine companies offered divergent interpretations of this amendment. Companies such as Teladoc and MDLive contended that the regulation targeted only video-based services, thereby restricting solely video consultations while allowing them to continue providing telephone-based services in Texas. However, the Medical Board maintained that these companies were exploiting a linguistic loophole, asserting that the intent of the regulation was unequivocal: to prohibit all telemedicine practices conducted without an initial in-person consultation.

Therefore, as Teladoc continued to provide telemedicine services to residents of Texas via telephone, the Texas Medical Board sent it an open letter demanding that it immediately cease providing any such services. The Board simultaneously issued an emergency rule clarifying any ambiguities in the previous version of the regulations regarding the distinction between telephone and video consultations. In response, Teladoc pushed back, contending that the rule had not been promulgated in accordance with proper procedures, and filed a lawsuit against the Board.

The lawsuit intensified in April 2015, with the potential to reach the Supreme Court. Teladoc sued the Medical Board under antitrust laws, alleging that the board, as an organization of licensed physicians, stood to gain economically from restricting the development of telemedicine and could not enforce regulations designed to stifle competitors.

The lawsuit lasted two years, costing Teladoc a significant financial toll. According to the company’s 2016 public financial reports, litigation expenses reached as high as $7 million in a single quarter.But Teladoc CEO Gorevic believes that all of this is worthwhile, as they are fighting for their right to operate their business and for their customers’ right to access better healthcare services. On the other hand, their willingness to stand up and challenge authority also underscores their leadership position in the telemedicine industry.

From the trajectory of the lawsuit, everything appears to be relatively favorable for Teladoc.The U.S. Federal Trade Commission (FTC), a key antitrust agency of the U.S. government, even filed an amicus curiae brief with the court supporting Teladoc’s position. Ultimately, both parties recognized that protracted litigation would only result in mutual harm, and that negotiation was preferable to further appeals to higher courts. Last autumn, the two sides requested a stay of proceedings, signaling the emergence of settlement prospects.

Gorevic concluded by stating that the signing of the bill would bring the lawsuit to a complete end, as there was “no longer any need for litigation.”

Since Teladoc began its legal battle with the Texas Medical Board in 2015, efforts have been underway for two years to resolve the dispute and reach a compromise between the parties through legislative means.

According to LaToya Thomas, Director of the National Policy Resource Center at the American Telemedicine Association (ATA), legislative guidance is not only the sole means of resolving the dispute between Teladoc and the Texas Medical Board, but also a necessary measure to prevent similar conflicts in the future.

Thomas believes that the case in Texas is particularly unique because it involves not only the Medical Board but also various other boards. The state’s advisory committee had previously attempted to pass similar regulations, but fortunately, this was prevented. Therefore, the participation of state legislators is essential.

Nora Belcher, Director of the Texas eHealth Alliance, stated that early legislative attempts were disorganized and failed to pass in the legislature. Therefore, although a series of bills aimed at addressing the Teladoc case have been proposed, they approach the issue from different perspectives and vary significantly in content, making it difficult for them to be truly effective.

In this scenario, Belcher, Teladoc, medical boards, and other stakeholders—including hospitals and nursing practitioners—began to come together for joint discussions.They attempted to convene a full year before the Legislative Council session commenced, with the aim of drafting a bill that would satisfy all parties.

It has been proven that,Providers’ demands are not extensive: they seek to ensure a robust standard of care, maintain existing licensing arrangements, and clarify reimbursement policies—particularly that Medicare will not cover telephone consultations or fax transmissions.However, the legislature did not intend to pass a “Supplier Act,” but rather to extend protections to all telehealth service providers. The bill enacted this session addresses all these issues.

Gorevic believes that the fundamental reason enabling Texas and telemedicine companies to collaborate ultimately is the shift in public perception of telemedicine from 2010 to the present.

He said, “Government regulators often tend to protect the status quo amid change. This is the case in Texas. The more new innovations demonstrate their value and take measures to ensure equity, the more they can disrupt the status quo and prompt it to adapt to innovation. As a leader in the telehealth market, Teladoc can drive this process.”Over time, people have come to increasingly recognize that telemedicine is not merely a gimmicky novelty, but an industry capable of addressing genuine challenges within the healthcare system and delivering substantial value to the people of Texas.”

Ultimately, the bill was passed unanimously by both the House of Representatives and the Senate. The enacted legislation even includes novel, forward-looking provisions,For example, redefining store-and-forward technology by incorporating cloud infrastructure, among other enhancements.. However, the bill also makes Texas the 20th state to ban abortion via telemedicine, indicating that the future development of telemedicine still faces significant challenges.

During the 185th Texas Legislature, SB 1107 was the most significant telemedicine bill to be enacted. In addition, three other telemedicine bills were passed during that legislative session.

SB 1633 will allow for the expanded use of remote pharmacy technologies in areas of Texas lacking pharmacies. Another bill, HB 1697, will establish a donation program to support tele-neonatal intensive care unit (NICU) services for premature infants. Additionally, SB 922 will ensure that telehealth services provided in schools are eligible for reimbursement under the Medicaid program.

In addition to SB1633, two other bills have been sent to the governor. The remote pharmacy bill is currently undergoing reconciliation between the House and the Senate.

In this regard, Belcher remarked, “This year has been a pleasant surprise for us. Last year, we submitted 17 bills, only two of which were enacted. If three of the four bills are passed this year, it will represent not only a structural victory but also hold significant symbolic meaning.”

Despite the current regulatory environment remaining less than favorable, all four of the nation’s top telemedicine companies have established some business operations in Texas. Teladoc and MDLive have been operating telephone-based services based on their interpretation of existing regulations; American Well has partnered with hospitals in Texas to provide its telemedicine services for hospital follow-up visits, thereby avoiding any legal issues; since mental health conditions have consistently fallen outside the scope of regulatory restrictions, Doctor on Demand has been able to continuously offer telephone-based mental health services in the state.

However, with the passage of the bill, the aforementioned four companies will be able to roll out remote video services in Texas and across China.

Belcher stated that Texas was the last state to permit telemedicine companies to provide video-based services within its borders. This is highly significant for these companies, as it means they can now finally implement strategic deployments across all states in the U.S.

Prior to the passage of the bill, American Well adopted the most cautious stance. Although, as mentioned above, the company was already providing telephone-based services in Texas, CEO Roy Schoenberg emphasized that they would not expand their operations in the state unless the Medical Board explicitly endorsed other telehealth business models. He remarked with a touch of irony, “We are not like those operators who try to exploit loopholes in the wording, assuming that such actions—or having physicians engage in them—will shield them from litigation.”

However, after the bill was passed, American Well believed that this would not only benefit its direct sales business but also strengthen corporate partnerships. Schoenberg stated that previously, due to regulations from the medical board, American Well had not conducted business directly in Texas, and many large national insurance companies it collaborated with, such as Anthem and United, were also affected and unable to enter the Texas market.

The newly passed legislation has opened the door for American Well and its platform clients to offer a full range of services in Texas. Previously, these clients were limited to patient follow-up visits; they can now fully activate their systems and leverage their complete capabilities.

Hill Ferguson, CEO of Doctor on Demand, told MobiHealthNews via email that the company has long provided mental health services through its video platform in Texas and has achieved success in this area. With the passage of the new legislation, his company will build on its mental health business to gradually expand into other care areas.

Scott Decker, CEO of MDLive, is not concerned that the passage of the bill will intensify competition. He believes that MDLive has already established a stable patient base in Texas’s telephonic healthcare market, and these patients are unlikely to switch readily to other video-based services. The enactment of the bill will provide MDLive with broader opportunities in Texas, with its solid user base serving as the company’s strongest guarantee of net revenue.

The passage of the Texas Telemedicine Act marks a significant victory, but it is far from the end of the legislative journey. Latoya Thomas of the ATA points out that the state of telemedicine in some states remains less than promising,For example, Connecticut and Rhode Island still have restrictive telemedicine laws for ophthalmology; Arkansas still has a ban on telephone consultations; the Iowa Board of Physical Therapy has recently issued a new regulation stipulating that only licensed physical therapists may provide telemedicine services for physical therapy.

Thomas also stated that the legislative victory in Texas is a strong first step and serves as a good model for other states. If Texas can achieve this, other states are highly likely to follow suit. “I believe other states should learn from Texas’s experience and give the green light to local telemedicine.”

Teladoc CEO Gorevic believes that all parties are paying close attention to the telemedicine legislation in Texas. The support from the Texas Legislature is a significant recognition of the value of telemedicine. Moreover, it complements the positive actions taken in Washington.

For example, the 21st Century Cures Act signed by President Obama in December 2016, and the CHRONIC Care Act (Creating High-Quality Results and Outcomes Necessary to Improve Chronic Care), which was approved by the Senate Finance Committee in May 2017, both support the use of telemedicine to improve the healthcare system.

On the other hand, most people agree thatThe biggest obstacle to the future development of telemedicine will be reimbursement issues.As Decker, CEO of MDLive, stated, the next legislative focus will be on Medicare reimbursement for telehealth-enabled outpatient services under the federal Medicare program nationwide.Yet even in states like Texas that have achieved telehealth parity, reimbursement remains exceedingly difficult in practice.

American Well CEO Schoenberg believes that “equity” looks appealing in legal texts, but when doctors ask whether they can get paid for providing telemedicine services to patients, the answer is an awkward uncertainty. In Schoenberg’s view, the root cause of the problem is Medicare’s fence-sitting stance. It may change in the future, but so far, people can only wait and see, unsure of what the right course of action is.

Of course, Texas’s telemedicine legislation marks a significant victory. Both stakeholders and legislators can celebrate this rare legislative win-win. Particularly for Texas, the second-largest state in the U.S., securing greater room for telemedicine development serves as a major encouragement to all companies within the industry. VCBeat will continue to closely monitor future developments in other aspects of telemedicine, such as reimbursement policies.

References:

http://www.mobihealthnews.com/content/depth-what-texass-landmark-telemedicine-legislation-means-industry-and-nation

http://www.natlawreview.com/article/last-not-least-texas-takes-final-steps-to-embrace-telemedicine

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