Telemedicine Management Services:
What is Fair Market Value?
The American Medical Association has finally released its survey data on telemedicine expenses. This means we finally have credible data for calculating the fair market value of telemedicine management services.
During the COVID-19 public health emergency (“PHE”), there was a compelling and immediate need to provide evaluation and management services through telemedicine. Medicare allowed providers to bill office-based visit E&M codes with modifier 95 to indicate when they were telemedicine visits.
The American Medical Association holds the copyright on the CPT coding system. The AMA licenses the CPT system to Medicare and all commercial insurance carriers. The AMA’s CPT Editorial Panel creates CPT codes. The AMA’s RVS Update Committee (“RUC”) assigns relative value units for physician compensation, practice expenses, and malpractice expenses to each physician service code. The RUC meets three times per year and oversees the administration of surveys distributed to physician members of dozens of medical and surgical specialty societies.
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Telemedicine Management Services: What is Fair Market Value?
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The AMA sends its CPT additions, removals, and updates to Medicare each April. Medicare has historically accepted 90% of the AMA’s changes in the Medicare physician fee schedule without changes.
The AMA’s CPT Editorial Panel added a new Evaluation and Management (“E&M”) section for telemedicine services during February of 2023. The AMA’s RUC administered surveys to members of dozens of specialty societies during April of 2023 and then again during September of 2023. These two rounds of surveys collected responses from hundreds of members of 36 medical and specialty societies.
Because the AMA collected hundreds of responses from members of 36 representative medical and specialty societies, this survey data probably represents THE most authoritative, credible, and reputable data available for telemedicine practice expenses and physician compensation.
The 2025 Medicare physician fee schedule proposed rule included the list of 17 real telemedicine CPT codes developed by the AMA with relative value units for each. The 17 new telemedicine codes include audio-video codes as well as audio-only codes.
The catch is that Medicare has a now-outdated statutory requirement to pay for telemedicine services as if they were provided in office settings. So for the time being, the 17 new telemedicine codes developed by the AMA will be listed on the Medicare physician fee schedule with Inactive (“I”) status indicators. Medicare will continue to pay for telemedicine services, when reimbursable, at the in-office E&M rates.
New Telemedicine Codes: Audio-Video (Physician Required)
The hundreds of physician respondents to the AMA’s telemedicine surveys generally found physician time and effort to be substantially the same for telemedicine visits as office visits. However, the responses collected concerning practice expenses indicated substantially lower practice expenses for telemedicine visits compared to office visits. Practice expense RVUs (“PE RVUs”) were 20% to 30% lower for telemedicine visits when compared to the associated in-office visit codes. The Practice Expense Subcommittee accepted the practice expense values submitted by the specialty societies unchanged in April of 2023 and reaffirmed them in September of 2023.
If reimbursement for the new telemedicine codes is going to be 20% to 30% lower than in-office E&M reimbursement rates, then commercial insurance carriers will probably adopt the new telemedicine CPT codes in the near future. Commercial insurance carriers are not restricted by Medicare’s statutory requirements.
Telemedicine Management Service Fees: Fair Market Value
Apart from Medicare, there is a flood of new opportunities for niche telemedicine services. Primary care, urgent care, men’s and women’s health, concierge medicine, and mental health services are all ripe for innovation.
In states that ban the Corporate Practice of Medicine it is necessary to bifurcate the professional services of medical providers separate and apart from all the non-medical practice expenses and technology services provided by management service organizations (“MSOs”).
Assuming that MSOs will operate under a turnkey management solution model (captive PC or friendly PC), we can assume that an MSO would carry all the non-medical practice expenses of a telemedicine service.
At a national level, this means that telemedicine MSO management service fees will probably range from 31% to 38% from service to service, with an overall rate somewhere in the middle. Using Medicare’s 2021 national telemedicine mix for all E&M services using modifier 95 across all specialties, the weighted average non-medical practice expense ratio is about 34% of total telemedicine service value.
Non-Medical Practice Expenses-to-Total Telemedicine Value:
All Specialties, National Medicare 2021
Unless an arrangement meets one or more of the adjustment exceptions below, this national 34% rate represents a good starting place for turnkey physician practice management services. Management companies can likely charge more than Fair Market Value, but management fees below Fair Market Value (without an exception) could be construed as a kickback to physicians in exchange for their business.
Telemedicine Management Fees:
Geographic Adjustments
Telemedicine management fees must be adjusted for the geographic market. Physician compensation, practice expenses, and malpractice expenses fluctuate wildly from market to market. The relative value ratios are affected by these market-specific fluctuations.
For example, the table below illustrates the large difference in rates between Alabama, the national averages, and San Francisco. Provider compensation and practice expenses are not static ratios from market to market. The Fair Market Value of telemedicine management fees will fluctuate from market to market.
Telemedicine Management Fees:
Specialty Case Mix Severity Adjustments
According to the AMA’s RUC meeting minutes, certain specialties like psychiatry and family medicine use telemedicine more than other specialties. The severity of telemedicine E&M coding levels can fluctuate from specialty to specialty and should be factored into Fair Market Value analysis.
The national E&M mix for all specialties from 2021 yielded an overall telemedicine management fee rate of 34%. This does not take into account any adjustments for differences between specialties or specific doctors.
The six specialties below all exhibit different telemedicine service mixes from the national overall telemedicine mix. Psychiatry’s telemedicine service mix is similar to family medicine. Specialists like cardiology, endocrinology, and nephrology tend to code many more level 4 and level 5 established patient visits compared to primary care and the national average.
Telemedicine Management Fees:
Non-Physician Adjustments
If you are using nurse practitioners, physician assistants, or some other non-physician provider, then telemedicine practice expense ratios will need to be adjusted for the relatively lower medical provider compensation and relatively higher practice expenses.
The table below illustrates that management fees are relatively higher when non-physician providers are used because the ratio of non-medical practice expenses-to-provider compensation is higher. If your telemedicine service uses a combination of physicians and non-physicians (working independently) then you might consider a blended rate.
The use of telemedicine is projected to grow aggressively in coming years. Arrangements with for-profit corporations in states that ban the Corporate Practice of Medicine can expect special scrutiny. Make sure your telemedicine management service fees are based on the most authoritative, credible, and reputable data available.
Contact Coker to order a Fair Market Value opinion for telemedicine management services.
