How to leverage the telemedicine surge to create a profitable telehealth model

July 31, 2020 1:08 am
Dan Marino
Lucy Zielinksi

Some things are always changing. Other things stay the same for years, even decades, until a catalyst event leads to rapid transformation and reveals an opportunity. Case in point — the dramatic surge in telehealth utilization during the COVID-19 pandemic.

Physician use of telemedicine grew steadily in the decade prior to the COVID-19 crisis. However, in the year ending March 2020, prompted by the crisis, telehealth’s share of commercial claims jumped from 0.17% to 7.52%.[a] A May 2020 report by McKinsey and Company suggests U.S. telehealth spending could increase from $3 billion to $250 billion per year.[b] Telehealth advocates see this as a tipping point. Many healthcare leaders now view telehealth as a viable strategy for improving patient access, reducing costs, raising patient and provider satisfaction, and even improving patient outcomes.

But establishing a profitable telehealth model will require careful forethought. The recent telehealth surge was clearly fueled by payment equity during COVID-19, and the payment outlook is unclear. Meanwhile, providers still have much work ahead of them to organize and leverage telehealth tools and systems.

Healthcare finance leaders can help by focusing on the economic and operational drivers that will determine the success or failure of a telehealth program. This process requires the following four broad steps.

1. Begin managing the margin

Because of the uncertainty around telehealth reimbursement, it is not possible to accurately determine the profit margin on a telehealth program. The best thing to do now is to begin identifying the parameters of financial performance and take steps to optimize them. Here are the core considerations.

Throughput. One clear benefit of telehealth is that it creates the opportunity for physicians to see more patients per hour than they can in an office setting. In the May 2020 issue of HFMA Financial Sustainability Report, we outlined a practice scenario in which physician revenue on a four-hour telehealth block was 22% higher than revenue on a similar office block.[c] Actual results depend on many factors, but the overall point is that telehealth can increase visit volume.

Payment. At the start of the pandemic, the Centers for Medicare & Medicaid Services (CMS) temporarily increased payment for telehealth services to match in-person care. Many commercial payers followed suit, but it is uncertain what will happen once contact restrictions are eased. For example, in the past, patients could not be at home for a telehealth visit but had to be at an originating site, such as a physician office or other defined healthcare site. This restriction was removed under the crisis, but it is not absolutely certain whether it might be reinstated in the future.

Going forward, many payment questions will be determined through payer policies and contract negotiations. Right now, finance leaders should start tracking payment rates. The exhibit below shows a sample payment dashboard that a hospital could use to track telehealth payment rates by CPT code across government and commercial payers.[d]

Sample payment dashboard for tracking telehealth payment rates



Work RVUs*


Payer A

Payer B

Payer C


Office outpatient new patient, Level 1 (10 minutes)




Office outpatient new patient, Level 2 (20 minutes)




Office outpatient new patient, Level 3 (30 minutes)




Office outpatient new patient, Level 4 (45 minutes)




Office outpatient new patient, Level 5 (60 minutes)




Office outpatient established patient, Level 1, (5 minutes)




Office outpatient established patient, Level 2 (10 minutes)




Office outpatient established patient, Level 3 (5 minutes)




Office outpatient established patient, Level 4 (25 minutes)




Office outpatient established patient, Level 5 (40 minutes)




Telephone service (5-10 minutes)




Telephone service (11-20 minutes)




Telephone service (21-30 minutes)




Brief virtual check-in (5-10 minutes)



*CMS Physician Fee Schedule, 2020
Source: Lumina Health Partners, 2020

Expenses. Telehealth visits do not impact fixed expenses, but they do decrease some of a practice’s variable expenses. Typically, a telehealth program can reduce staffing and supply costs by 10% or higher. Further, office space left empty can be used for other physicians or timesharing (subleasing).

Coding. Finance leaders should carefully review telehealth coding to make sure they are not inadvertently leaving revenue on the table. Policies differ by payer, so leaders should work with each company to understand:

  • Which telehealth CPT codes are covered?
  • Which modifiers should be used for telehealth services?
  • Which place-of-service codes should be used in telehealth claims?

Care model design. Beyond being helpful, a team-based model of care may actually be essential in making telehealth work financially. Many telehealth services can be delivered by advanced practice providers (APPs) such as physician assistants and nurse practitioners. Such a model can improve the economics of telehealth while enabling physicians to focus on in-person visits. The goal is to for all providers to work at the top of their licenses.

As practice leaders develop the telehealth financial model, they should incorporate telehealth-specific key performance indicators (KPIs) into their management processes. The sample dashboard below presents possible telehealth KPIs.

Sample dashboard showing telehealth performance targets


Office visit

Telehealth visit

Revenue (daily/monthly)

$00 / $00

$00 / $00

Charges (daily/monthly)



Average payment per visit



Average payment per CPT (Payer A)



Average payment per CPT (Payer B)



Average payment per CPT (Payer C)



Denial rate



Consultation Time

00 min

00 min

Wait time

00 min

00 min

Cancellation rate



No-show rate



Next and third available appointment

0.0 / 0.0 days

0.0 / 0.0 days

Patient retention rate



Patient satisfaction scores



Emergency department or readmission days (number of days from visit)

0.0 days

0.0 days

Source: Lumina Health Partners, 2020

Tracking these KPIs will be key to understanding the economics of telehealth versus traditional office care. This approach will also help establish the role of telehealth in value-based contracts.

2. Build operational support structures

Once practice leaders have a realistic set of targets for a telehealth transition, the next step is to build telehealth operations. Neither patients nor providers will embrace telehealth if it does not operate smoothly. Key elements that must be addressed include the following.

Scheduling. Organizations should consider implementing a centralized system for scheduling telehealth visits and preparing patients for their remote appointments. Again, clear telehealth guidelines are critical, because call center staff will need to triage patients to the right visit type. A high-quality scheduling process also will help build the group’s telehealth brand, and it keeps patients in the network.

Technology and data. Ideally, a practice’s telehealth platform will integrate with its electronic health record (EHR). In reality, not every EHR has a telehealth module, and many modules perform unevenly. EHR companies are currently scrambling to create and improve their telehealth integrations, so it is important to stay in touch with vendors to understand each system’s capabilities. The highest priority should be to integrate the telehealth scheduling system with the electronic medical record system.

Patient communication. Patients tend to be in favor of telehealth. But for most, it is new territory. Therefore, creating a patient communication system also should be a high priority. The system’s first objective must be to make sure patients know that telehealth visits are available and understand how to access them. A variety of tools should be used for this purpose, including:

  • Websites
  • Email
  • Postal mail
  • Patient portals
  • Answering services
  • Social media

It also is important to ensure patients are familiar with the telehealth platform before their appointment. A little proactive education will avoid many frustrating and costly delays as patients struggle with unfamiliar technology.

3. Outline the clinical opportunity

What portion of medical practice volume could be converted to telehealth? The previously cited report by Mckinsey and Company finds that 24% of all office visits and outpatient encounters in the U.S. could be delivered in a fully remote format. To develop a realistic estimate of a practice’s telehealth opportunity, an organization should consider its patient and specialty mix, and physician and patient preferences.

Patient and specialty mix. Mental health professionals have long provided psychotherapy remotely, and many primary care physicians have used telehealth to replace office visits for patients with simple cold or flu symptoms. During COVID-19, physicians have found many new ways to use telehealth effectively in a variety of specialty settings.

From a value-based care perspective, some of the biggest opportunities are in primary care. Many family practices can use telehealth to monitor and manage care for chronic health conditions like diabetes or high blood pressure, address non-complicated acute conditions and refill routine medication prescriptions.

Physician preference. It is important to understand the practice preferences of individual physicians. Some physicians strongly prefer in-person contact, while others are very comfortable with telemedicine. For the latter group, telehealth provides an excellent opportunity for achieving flexibility and better work-life balance, which could help reduce physician burnout and turnover.  

The key to raising physicians’ comfort level with telehealth is to establish telehealth guidelines based on patient needs and visit type. For example, some physicians might agree to conduct new patient visits remotely for certain conditions if pertinent patient information and lab data is collected ahead of time.

It also is important to establish an appropriate cadence between office and remote visits for established patients. For instance, a patient with diabetes might receive an in-person visit every four months, with monthly virtual check-ins in between.

And again, care model design is a key consideration. Telehealth programs can be structured to allow both advanced care providers and physicians to practice at the top of their license.

Patient preference. Studies consistently show that patients have a generally positive view of telehealth. Still, it is important to evaluate a practice’s specific patient population when planning to shift visit volume. Although technology adoption is generally lower among older adults, many geriatric patients might value the convenience of virtual visits for simple healthcare needs. Providing patients with some assistance in managing online tools can help raise their comfort level with remote visits. For example, a practice can educate patients using a how-to guide or an online video, as well as have office staff test the technology with the patient prior to the visit.  

4. Create the value platform

Ultimately, financial success under the telehealth model hinges on payment. A recent article in Health Affairs called on CMS and state legislatures to maintain pandemic-level payment levels.[e] Although policy outcomes are uncertain, there is good reason to expect that payers will increasingly recognize the value of telehealth services. For healthcare finance leaders, the priority now is to incorporate telehealth into value-based contract negotiations.

Finance leaders should start by tracking costs and patient outcomes for telehealth services and developing comparisons with traditional office-based care models. Again, the biggest opportunity might be in improving care of chronic conditions.

Telehealth offers an opportunity to increase contact with patients who need health coaching. It also can increase access for chronically ill patients who lack access to transportation. Healthcare organizations that can demonstrate a link between telehealth investments and better patient outcomes should be able to secure higher payment in value-based contracts.

During contract negotiations, healthcare organizations should watch out for misinformation. Historically, some large commercial payers have consolidated all their telehealth coverage to a small number of large national telehealth vendors. This is a business decision, not a legal one. There is no basis in law or regulation for excluding traditional medical practices from offering telehealth services and getting paid for them.

The new normal and beyond

Healthcare leaders should focus now on four areas of action with respect to telehealth:

  1. Understanding how telehealth can fit in their clinical mission
  2. Building operational support structures
  3. Creating a telehealth financial model
  4. Demonstrating to payers that telehealth is an effective lever for increasing healthcare value

Careful and effective management of all these areas is the key to turning the new normal of telehealth into a new way forward for healthcare.


[a] Kacik, A., “Telehealth spending to reach $250 billion in 2020,” Modern Healthcare, June 2, 2020.

[b] Oleg Bestsennyy, O., Gilbert, G., Harris, A., Rost, j., Telehealth: A quarter-trillion dollar post-COVID-19 reality? McKinsey and Company, May 2020.

[c] Zielinski, L., “How to plan for and profitably operate telehealth services,” HFMA Financial Sustainability Report, May 2020.

[d] Although there are almost 200 telehealth codes, this sample dashboard lists only those codes most frequently used for in-person visits.

[e]  June-Ho K., Desai, F. and Cole, M.B., “How the rapid shift to telehealth leaves many community health centers behind during the COVID-19 pandemic,” Health Affairs, June 2, 2020.


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