The Boom in Out-of-State Telehealth Threatens In-State Providers

This story also ran on Fortune. It can be republished for free.

HELENA, Mont. — When the Hazelden Betty Ford Foundation began offering telehealth services in Montana in early February, the nation’s largest nonprofit addiction treatment provider promised quality care for far-flung residents without their even having to leave home.

That promise was what Montana and more than 40 other states had in mind when they temporarily relaxed rules restricting telehealth services and allowed out-of-state providers to hold remote patient visits for the duration of the covid-19 pandemic.

A year into the pandemic, telehealth has become widely accepted. Some states are now looking to make permanent the measures that have fueled its growth. But with it have come some unintended consequences, such as a rise in fraud, potential access problems for vulnerable groups and conflicts between out-of-state and in-state health providers.

In Montana, for example, not everybody cheered the virtual arrival of the Minnesota-based Hazelden Betty Ford Foundation. The head of Montana’s largest behavioral health provider, Billings-based Rimrock, worried that an influx of out-of-state providers could lead to Rimrock’s losing a significant number of its privately insured patients.

Rimrock patients with private insurance subsidize patients who are on Medicaid, CEO Lenette Kosovich said. The difference in insurance reimbursement rates between the two is so great that the loss of those privately insured patients would hamper Rimrock’s operations, she said.

“I’m all for competition, as long as it’s fair competition,” Kosovich said. She added that she would like to see rules in place ensuring that out-of-state providers that enter Montana via the relaxed regulations of the pandemic meet the same licensing requirements as in-state providers.

“They don’t take Medicaid, so they don’t have to go through the same rigors,” she said. “We’ve been really very vocal that we want more legislation that speaks to that. Even the playing field.”

Hazelden Betty Ford is not out to poach anybody else’s patients, said Bob Poznanovich, the foundation’s vice president of business development. Instead, it’s targeting patients who aren’t receiving care and can’t go to one of its 15 drug and alcohol rehabilitation centers, he said.

“We think it’s important that a national brand like ours is able to provide care nationally,” Poznanovich said. “That becomes important to our patients, who come from all over the country. It’s also important, I think, for people who can’t access quality care, who are in some health care deserts where there just isn’t good care.”

A federal government survey estimated that a shortage of mental health providers exist in 5,800 geographic areas, populations or facilities — such as prisons — across the U.S., with 6,450 practitioners needed to fill the gaps. For primary care, the need is even greater, with nearly 7,300 areas short of health professionals.

For patients nationwide, telehealth can make getting medical care much easier. Ayanna Miller, a 24-year-old student at Northeastern University in Boston, is among those embracing the technology.

“Sometimes you don’t really need to go into the office. You really just need, like, a quick conversation with your doctor,” she said. “I’ve also done telehealth for therapy. You don’t necessarily need to be in the same room with your therapist.”

As the stresses of the pandemic have strained mental health and addiction recovery, the need for help has increased. Hazelden Betty Ford has accelerated its pre-covid plans for expansion and expects to offer telehealth services in all 50 states within two years. Next on deck: Arizona and New Mexico.

“We’ve heard grumblings, like ‘Why are you coming into our state?’” Poznanovich said. But, he added, “More people have welcomed the entry into the marketplace because they think that we will help create a bigger marketplace.”

Before covid, remote doctor visits by computer or phone were rare: Just 2.4% of enrollees in large-employer health plans used a telehealth service in 2018, according to KFF. That was due in part to different policies among states and federal rules that limited where and to whom telehealth services could be offered.

But now, states are waiving patient copays and coinsurance, reimbursing telehealth services at the same rate as in-person services, waiving licensure requirements and allowing audio-only visits, among other measures.

In the first months of the pandemic, with lockdowns the norm throughout the country, telehealth visits surged to about 7 in 10 medical appointments, according to the Epic Health Research Network. That had tapered off to about 1 in 5 visits as of summer.

Existing and startup services are flourishing. Poznanovich compared the surge to the dot-com boom of the early part of the century, noting that the foundation’s internal studies show that hundreds of telehealth companies have received financing.

“There is a land-grab mentality right now,” he said. “We’re seeing some really crazy market valuations because of the potential number of clients.”

Today’s rush will lead to permanent changes in health care, said Florida radiologist Dr. Ashley Maru, who invested in three telehealth companies. More innovative virtual providers entering the field may come at the expense of physicians who see patients in brick-and-mortar offices. But it also presents a solution to the national shortage of doctors, he said.

“You’re going to see a national change in the landscape of medicine,” Maru said. “They’re going to be able to cross state lines and really uproot and disrupt everything.”

The prospect of unfettered interstate virtual health care worries some health industry officials. Blue Cross and Blue Shield of Montana spokesperson John Doran said he shares Kosovich’s concerns that local providers could suffer or be driven out of business, particularly in smaller states.

“The future of medicine has to include connecting a Montana patient to a Montana provider,” Doran said.

Poznanovich said that, besides providing services to people who weren’t receiving them before, Hazelden Betty Ford Foundation forms partnerships with local providers in some markets and offers education and resources to providers where it expands.

Some states are forging ahead with plans to make their telehealth changes permanent. A Montana bill passed the state House of Representatives unanimously Feb. 9 and is pending in the Senate.

“We were forced to use technologies in ways that we maybe thought we weren’t ready for and it turns out that we were,” Jackie Jones, government affairs director for the state’s securities and insurance commissioner, recently told state lawmakers in supporting the bill.

Certain patients may be left out of the telehealth revolution. The rapid, wide-scale implementation of telemedicine could leave behind people with limited internet access or tech literacy, including the elderly, poor and non-English speakers, according to a New England Journal of Medicine article.

Meanwhile, telehealth fraud cases have “gone through the roof,” said Mike Cohen, an operations officer with the Office of Investigations of the Department of Health and Human Services’ inspector general’s office. Telehealth in general is a good thing, he said, but with any popular medical advancement, “there’s going to be rats on the ship.”

Many fraudsters are trying to steal patients’ identities and sell them on the black market, he said. Some providers are overcharging for appointments, are billing for services that weren’t given, or are not registered or licensed in the U.S. Some scammers offer to put a patient at the front of the line for a covid vaccine in exchange for payment.

“Our sense is that it’s more widespread than we envisioned,” Cohen said. “If we’re going to make this permanent, we need to make sure there’s guardrails to ensure programmatic integrity and also patient safety.”

Even when working optimally, telehealth can have its limits. Miller, the Northeastern University student, said she was diagnosed with covid in January and had mild symptoms. By early February, she felt better and wanted to schedule an in-person physical with her doctor to find out if the virus had affected her in other ways.

The doctor was taking only virtual appointments, and Miller was left feeling unsatisfied just answering the doctor’s questions by video call.

“The scariest thing about covid is you just don’t know how it’s going to impact you,” Miller said. “I can say how I feel, but I don’t know if there’s anything that I’m not catching because I’m not trained.”

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