OVERVIEW

Digital health is one of the fast-growing segments of the healthcare market, with patients, clinicians and regulators increasingly aligned behind the opportunities that digitization presents.

Over the last three years, patients and clinicians alike have embraced digitally delivered care and telehealth-related flexibilities. In 2022, we saw state legislative and regulatory activity centered around states making key temporary COVID-19 flexibilities permanent or adjusting previously enacted telehealth laws and regulations. The increase in digitally delivered healthcare activity has led to an increased focus on the privacy and security of patient and consumer data in 2022. We also observed increasing federal attention to fraud and abuse risks associated with telehealth. Separately, the ruling in Dobbs v. Jackson Women's Health Organization forced digital women's health providers to examine, and sometimes change, their operations in response to state law requirements.

As the federal COVID-19 public health emergency (PHE) winds down (now slated to end on May 11), we can expect in 2023 to see the federal government and state governments continuing to implement some of these flexibilities on a permanent basis, while setting new standards for telehealth and digital care in a post-PHE world, along with a continuing focus on the privacy and security of patient and consumer data.

On the transactional front, deal flow may be muted in 2023 while compared against record-high activity in 2021 and 2022, but it is also probable that investors will continue to get behind transformative digital health solutions that can enhance the patient experience, reduce cost, drive efficiencies and tackle workforce challenges, accompanied by a simultaneous and continuing level of focused regulatory diligence.

TELEHEALTH 2022 SUMMARY

STATE LEGISLATION AND REGULATORY TRENDS

In 2022, McDermott tracked more than 100 state-enacted bills and close to 90 final and emergency state regulations related to telehealth. Much of this legislative and regulatory activity centered around states making certain temporary COVID-19 flexibilities permanent or adjusting previously enacted telehealth laws and regulations. A key area of focus in this were statutes and regulations pertaining to health professionals. This included expanding the scope of practice for various professionals to include telehealth, updating telehealth-related definitions and implementing standards for the provision of services via telehealth.

A dominant trend was the adoption of laws and regulations addressing cross-state licensing. As most states have eliminated their COVID-19-related interstate license waivers, many states sought to address cross-state licensing on a permanent basis. Enacted legislation included licensure or registration processes for out-of-state providers, providing exceptions from licensing requirements where a prior provider-patient relationship exists, and licensure compacts. A significant amount of licensure compact activity continued, with states joining the Audiology and Speech Language Pathology Compact (eight states), Counseling Compact (15 states), EMS Compact (one state), Interjurisdictional Psychology Compact (eight states), Interstate Medical Licensure Compact (four states) and Occupational Therapy Compact (13 states).

Other areas of legislative and regulatory focus included telehealth prescribing (addressing prescribing of controlled substances, buprenorphine and cannabis, as well as standards for forming the provider-patient relationship required for telehealth prescribing), Medicaid reimbursement (including coverage for audio-only and asynchronous modalities), payment parity and private payer reimbursement, and the provision of abortion medication via telehealth.

DOJ AND OIG FOCUS ON TELEHEALTH

Given the proliferation in telehealth since the start of the COVID-19 pandemic, 2022 saw the US Department of Justice (DOJ) and US Department of Health and Human Services (HHS) Office of Inspector General (OIG) turn increasing attention to fraud and abuse risks associated with telehealth.

In July, OIG issued a Special Fraud Alert concerning the fraud and abuse risks associated with healthcare practitioners entering into arrangements with telemedicine companies, see our On the Subject (OTS) here. The alert followed dozens of civil and criminal investigations into alleged fraud schemes involving companies that claimed to provide telehealth, telemedicine or telemarketing services but allegedly engaged in kickbacks and substandard medical practices to generate medically unnecessary orders and prescriptions for items or services, resulting in submissions of fraudulent claims to Medicare, Medicaid and other federal healthcare programs. The alert also came on the heels of a nationally coordinated DOJ takedown involving more than $1 billion in allegedly fraudulent telemedicine schemes. Based on the OIG and DOJ's telemedicine enforcement experience, the alert identifies a non-exhaustive list of seven "suspect characteristics" that could suggest a telemedicine arrangement presents potential risk for fraud and abuse. While the characteristics highlighted in the alert are not representative of the legitimate and crucial telemedicine services offered by most healthcare providers, the alert and the government's sustained focus on potential telemedicine-related fraud cases provide an important opportunity for healthcare providers to evaluate their telemedicine offerings and arrangements and strengthen their telemedicine compliance activities.

In September, OIG released a data brief analyzing telehealth services covered by Medicare and related program integrity risks, evaluating the impact that the regulatory flexibilities implemented during COVID-19, and corresponding hikes in utilization rates for telehealth services by Medicare beneficiaries, had on program integrity, see OTS here. OIG found that of the 742,000 providers evaluated, 1,714 had "concerning billing" on at least one of the seven measures that OIG considers to be potential indicators of fraud, waste and abuse. Providers should continue to ensure that telehealth services are properly billed in accordance with applicable billing policies. As the PHE winds down, providers should be aware of flexibilities that may be modified or cease to exist, and should update their billing practices accordingly.

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