The Cost of Red Tape

Recently, the Centers for Medicare and Medicaid Services (CMS) came out with an interpretation of how a hospital should provide quality assurance for physicians providing health care via telemedicine to a patient in the hospital. The issue swirls around privileging, the process used by health facilities, after verification of credentials, to grant a physician the authority to provide a specific scope of patient care services, largely based on past performance, capabilities and skills. The new interpretation represents a dramatic change from the current approach in use across the country and could create a dire situation for telemedicine networks, teleradiology companies and other programs providing remote health services. It would affect all hospital-based telemedicine services across the country, including non-Medicare related services.

However, there is a chance that we might avoid this train wreck before it happens. Recent meetings with CMS officials, other leaders in the Administration and members of Congress have increased the awareness of the issue. Suggestions were offered. The seriousness was made clear. But time is running out.

The new interpretation from inside CMS would require each local hospital to individually privilege every physician providing telemedicine services to patients in the hospital. This is contrary to the procedure currently used by the Joint Commission on behalf of CMS whereby the local hospital can have a written, blanket agreement that accepts both the credentialing and privileging of the distant organization where the physicians are physically located. This has been an efficient and effective approach that relies on the quality assurance controls of the larger referral facilities where there is usually far greater expertise and close oversight of the physician’s activities.

To understand the potential catastrophic costs of such a new requirement, let’s take a conservative look at the potential cost for a single telemedicine network that, over the course of a year, uses 40 doctors to provide telemedicine services to 60 sites.

To cover the costs of privileging, there is generally an up-front application fee by the local hospital for their initial determination of privileging and a fee to maintain a physician’s privileging status every two years. A typical cost for this service would be $300 for the initial application and $150 for the renewal. All 40 doctors would have to be individually privileged at each site in the network since there is no way to predict what doctor would be needed at which local site. This works out to be a minimum of $12,000 for each site for the initial privileging fees with an additional $6,000 per site every two years for the renewals.

For the sample telemedicine network it would result in a minimum additional cost of $720,000 in initial fees plus $360,000 every two years to meet the new CMS interpetation. This just covers the fees and does not include the associated FTE cost of having 3-5 physicians meet to review and take action for each privileging determination.


For all of telemedicine nationally, the cost of this new interpretation by CMS would be astounding, certainly millions of dollars. There are 200 telemedicine networks connecting to over 3,000 sites across the United States. Plus, approximately 3,000 hospitals also contract out for teleradiology services, which, over a year’s time are provided by 20-30 radiologists per site.

Recent conversations and meetings with CMS leaders, officials in the White House and Members of Congress have resulted in an agreement that this issue must be addressed as soon as possible. The deadline for implementing this new interpretation is July 15, 2010.

Stay tuned...