The Future of Virtual Healthcare, Part 3: Payment and Regulations in a Virtual Setting
Categories: Employers Resources, For Employers, Navigation
This white paper was co-written by Ami Parekh, M.D., J.D. and Nupur Srivastava.
Prior to 2020, many believed virtual care was the future but that its adoption would follow a gradual incline. Then COVID-19 hit last year, breaking every healthcare process in the country and forcing people to use telemedicine at unthinkable rates.
But with vaccines starting to roll out, promising the return to some semblance of normalcy later this year, the stakes are incredibly high when it comes to ensuring that people permanently adopt virtual-first healthcare. It’s our belief that, in order to sustain adoption rates once the pandemic is over, the virtual-first care experience must improve ten-fold.
That said, here are our predictions around how regulatory changes pertaining to access to care along with a shift in payment models will help usher in the era of virtual-first healthcare:
1. Urgent need for more equitable access to care will make permanent the temporarily relaxed state-of-emergency provider regulations that enabled cross-state practice of medicine during the initial COVID-19 outbreak
The onset of COVID-19 upended access to care and forced a legislative reckoning within the US healthcare system. In order to create broader access to virtual medicine amidst the pandemic, most states either (i) enacted physician licensing waivers or (ii) expedited the physician licensing application process. The patchwork set of licensing rules that varied state to state was cumbersome to track and follow, but the effort without question increased the access to clinical resources.
Even prior to COVID-19, US citizens experienced severe provider access limitations, especially minorities. 41% of Hispanics and 23% of African Americans lacked a PCP²⁴. The pandemic has also caused 43% of providers to reduce staff at their practices and an estimated 16,000 practices will close in 2020²⁵. The access problems that the regulations were intended to address back in the spring have only gotten worse, and this affects our most vulnerable populations the most.
It’s still unclear whether these regulations will become permanent, but the experiment proved that loosening regulations could improve access without serious negative consequences to patient health. Patients and providers alike supported the expanded access to telehealth resources, and Rep. Robin Kelly (D – Illinois) introduced a bill in June 2020 that would gather data to enable CMS to make the relaxed regulations permanent. We believe that regulators will do the right thing in the name of protecting public health and permanently expand access to virtual care in the US.
2. Partial capitation payments for virtual care programs are closer than you might think
Capitation payments, where clinicians are paid a fixed per-patient fee to provide covered medical services for that patient for a defined period of time, became popular during the rise of health maintenance organizations (HMOs) in the 1980s and 1990s before taking a back seat to preferred provider organization (PPO) plans²⁶. By 2007, only 7% of providers participated in capitation arrangements²⁷. More recently, accountable care organizations (ACOs) brought capitation payment back into the picture, but fee-for-service payment is still the dominant payment model in the US.
Telemedicine mostly bills through fee-for-service arrangements, but many health benefits that do not involve practice of medicine are already paid via capitation payments—usually a per-member-per-month or per-employee-per-month fee—for unlimited use of the benefits offered. These vendors’ preexisting experience operating in a capitation model will enable those vendors (who begin to offer virtual primary care) to transition into partial capitation arrangements to offer primary care to a designated population much more comfortably than their fee-for-service peers. This is in contrast to full capitation arrangements where providers would be on the hook for all care a population needs, not just primary care, and is still a ways off.
Further enabling tech-savvy health benefit vendors to make the jump into partial capitation is the technology and data expertise at the core of their offerings. Vendors who can intake, warehouse and analyze claims data and electronic medical records can more reliably measure the health outcomes and quality targets as part of capitation incentive payments.
A couple of factors will slow the uptake of capitation in virtual primary care, but it will eventually become the standard model. First, we expect that many buyers will prefer fee-for-service payment plans until the virtual primary care programs are more established. Second, aligning on what is and is not covered in a virtual primary care capitation model will take some massaging, as certain preventative care will still need to take place in person. As a result, agreeing on the capitation payments will also take some work.
However, buyers who ascribe to value-based care will be able to find vendor partners who are willing to accept partial capitation payments, and the vendors who can effectively track, analyze and report on outcomes will also welcome outcomes-based incentives (and penalties) to align with buyers to drive high-quality, high-value care.
By expanding access to virtual care with a permanent loosening of regulations, patients will be able to receive better, high-quality care no matter where they live. And allowing a partial capitation model to become the standard will further advance the uptick in adoption of virtual-first care. These changes, coupled with healthcare navigation and continuing advances in technology including machine learning, will help provide a significantly better patient experience, thereby improving health outcomes.