Posted: 06 Aug. 2020 10 min. read

As virtual health goes mainstream, providers/payers need to determine the right price

By Bill Fera, principal, and Mark Bethke, managing director, Deloitte Consulting LLP 

Over the course of just a few months, virtual health has shifted from the periphery of health care to somewhere closer to the center of it. Recent surges in COVID-19 infections will likely encourage even more consumers to meet with their doctors through a device rather than in an office or hospital. We expect that will further solidify virtual health as an important part of the overall patient experience. While the adoption of virtual health is likely to grow even after the pandemic subsides, there is little agreement about exactly how to pay for it.

For health systems, virtual health holds the promise of increased revenue and market share and enhanced consumer engagement. For health plans, it can reduce overall care costs, and for patients, it can mean easier access and increased convenience. A blog we published in April suggested that the pandemic might have accelerated virtual care by a decade. That’s true. But determining how to price virtual health was a challenge long before we ever heard of COVID-19.

Prior to the pandemic, most large commercial health plans allowed virtual health, but they typically paid for it through a centralized vendor. For qualifying CPT/HCPCS codes, health plans usually paid the same amount whether a visit was virtual or in-person. Prior to COVID-19, some of our clients were already moving more of their behavioral/mental health services into virtual formats (this was one area where they were generally paid). As virtual health services become more mainstream, hospitals, health systems, and physician practices need to work collaboratively with health plans to determine a pricing framework for a broad range of services.

Rather than establishing a fixed charge for each type of encounter, we believe virtual health should be priced on a sliding scale that incorporates the patient’s acuity and the complexity of care. A primary-care encounter or outpatient follow-up visit, for example, might be priced at 80 percent of a face-to-face visit. Such visits tend to be scheduled in advance and typically do not involve complex procedures. There might be considerations for specialty care to get paid at a higher rate if the services provided are complex. Virtual visits that are part of a care-management program might be priced closer to a face-to-face visit or they might be bundled. A multifaceted interaction, such as a hospital-at-home encounter or emergency visit, might be priced higher than an actual in-person encounter at a hospital or emergency room, but it could help reduce overall care costs in the long-run. 

The level of technology used should also be considered when pricing a virtual visit. Phone calls or text messages between a doctor and patient are inexpensive and should be priced accordingly. Such services could be rolled into a coordinated care payment or combined with other virtual solutions. A virtual visit that incorporates something like virtual reality, by contrast, would require more expensive technology than lower-tech encounters.

Virtual health from the health plan’s perspective…

All stakeholders should be trying to increase the affordability of care while improving outcomes and enhancing the patient experience. A health plan might pay $5,000 for a minor surgical procedure conducted in a hospital but could pay $2,000 for the same service at an ambulatory surgery center where the overhead is substantially lower. Logging on to a video call with a doctor should be much less expensive than meeting the doctor in an office. However, clinicians need to be paid a fair rate for their services. Some health plans might be willing to offer incentives—through value-based payment arrangements—for virtual visits that reduce the overall cost of care. Upside and downside risk arrangements could also incentivize the use of virtual services outside of fee-for-service arrangements.

Health plans need to closely monitor the effect their pricing strategy has on the overall use of health care services and determine whether it led to fewer admissions, readmissions, and emergency room visits. They also need to have controls in place to quickly detect any potential issues of fraud, waste, and abuse.

…from the clinician’s perspective

The Nebraska Psychiatric Institute was among the first health care providers to use closed-circuit television to remotely interact with patients. The technology available in 1959, however, was limited.1 Today, patients can connect with clinicians through a wide range of channels and incorporate sophisticated technology. Physicians, for example, can securely view patient images and reports. The technology can also facilitate greater collaboration among clinicians and quicker diagnoses.

Some health systems are now eyeing virtual health as an opportunity to handle patient volume more efficiently. A canceled virtual visit might be easier to replace than an in-person appointment. Increased adoption of virtual health might also lead to more flexible schedules for clinicians. For hospitals, virtual health could be effective in triaging patients from their homes, which could help make sure that only appropriate cases are sent to the emergency room.

Some organizations might not have the infrastructure or technology needed to conduct virtual visits on a large scale. While they might want to continue to offer virtual services, they will need to ensure that payments are large enough to keep the virtual doors open. If reimbursement levels are high enough, providers will have a financial incentive to continue or expand their virtual services.

…and from the consumer’s perspective

Nearly 85% of consumers who experienced a virtual health visit during the pandemic said they were “somewhat satisfied” or “extremely satisfied” with the level of care they received, according to a consumer survey conducted by Deloitte's Center for Health Solutions in April and May. Four out of five consumers who participated in virtual health during the pandemic said they are likely to use those services again.

As COVID-19 infections spike throughout the country, virtual health could continue to accelerate. Consumers now recognize the convenience and safety virtual health offers. If they see it as generally effective and efficient, they are likely to demand it. The same is true for health systems and clinicians. As they recognize the benefits, they will be more willing meet with patients virtually—as long as they can get paid for it.

The health care sector has been trudging toward virtual health for years. While the pandemic might have accelerated adoption by a decade, the payment framework needs to catch up.

Endnotes

1.  A History of telepsychiatry, The American Psychiatric Association, https://www.psychiatry.org/psychiatrists/practice/telepsychiatry/toolkit/history-of-telepsychiatry

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Bill Fera, MD

Bill Fera, MD

Principal | Deloitte Consulting LLP

Bill Fera, MD, is a principal, Deloitte Consulting LLP. Fera specializes in technology-enabled transformation to support the advancement of population health strategies. As a practicing physician, health system executive, and consultant, Fera has worked across health plans and health systems to drive toward a value-based, patient-centered model of care. He is based in Pittsburgh, PA.