In-Depth: What Texas's landmark telemedicine legislation means for the industry and the nation

By Jonah Comstock
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In the State of Texas, a major piece of telemedicine legislation is sitting on Governor Greg Abbott’s desk. Known as Senate Bill 1107 and House Bill 2697, the bill abolishes the requirement that patient-physician relationships be established with an in-person visit before telemedicine can be used.

(Update: As expected, Abbott signed the bill on Saturday.)

Texas is the final state of 50 to abolish this requirement, so the bill's passage will allow national direct-to-consumer telemedicine companies like Teladoc, American Well, Doctor on Demand, and MD Live to extend their video-based operations nationwide. Technically, there are still limitations in Arkansas and Idaho, as those states still have restrictions on phone call-only telemedicine.

As well as opening up this market and bringing telemedicine services to a large, geographically distributed population that could greatly benefit from them, this bill also signals the end of a more than two-year legal battle between Teladoc and the Texas Medical Board that culminated in what might have been a landmark antitrust case.

As we wait for Governor Abbott to sign the bill (and according to multiple sources, the signing is all but a foregone conclusion), MobiHealthNews is diving deep into the history of this bill, how it came to be, and what its passing means for Texas, telemedicine, and the nation.

History: A medical board rule and legal battles

In some ways, Texas is an unlikely last state to welcome telemedicine. As a large state with a geographically distributed population and a lot of rural poverty, it’s a prime candidate for the benefits of telemedicine.

“Texas has 35 counties that don’t have a single family physician in them,” Teladoc CEO Jason Gorevic told MobiHealthNews. “They rank 46th in the country in terms of primary care physicians per capita at a time when the state’s population is growing faster than any other state. So the access issues are particularly acute.”

Teladoc, which is based in Dallas, began operating in the state in 2005. But around 2010 the Texas Medical Board began restricting the practice of telemedicine, especially telemedicine by video, through a prescribing rule revision that required physicians to establish their patient relationship with an in-person visit.

This is where there are two different versions of the story. Teladoc and MDLive, which have operated continuously in Texas with their phone-only services, maintain that medical board rules have always permitted phone calls, even when they restricted the use of video telemedicine. The Medical Board, conversely, has maintained that this is essentially a loophole created by a drafting error and that the intent of the rule is clear: to forbid all telemedicine without an establishing in-person visit.

When Teladoc continued to use telemedicine by phone, the Texas Medical Board sent them a public letter telling asking them to stop, then issued an emergency rule clearing up any ambiguity between phone and video visits. Teladoc sued over the rule, saying that the interpretation of the law in the letter constituted a rule in and of itelf and that the making of that rule didn’t follow the proper procedures for rulemaking.

To make a long story short, that lawsuit beget a much bigger lawsuit in April 2015, one which might have gone all the way up to the Supreme Court. Teladoc sued the medical board under antitrust laws, saying that as a group of practicing physicians with a financial interest in the restriction of telemedicine, the medical board couldn’t pass rules designed to muscle out its competition.

“Unfortunately we had to go to bat for our clients’ right to avail themselves of our services,” Gorevic said. “But it was worth the effort, and we see that as our responsibility as a leader in the space. We never ceased operating in the state and in fact we were reluctant to go to court, but ultimately the reason we went to court was to protect our right to continue to operate and the right of our clients to operate our services. … We stepped up and took a stand and we didn’t see any of our competitors doing the same thing.”

That lawsuit dragged on for two years with a number of twists and turns and cost Teladoc $7 million in a single quarter, according to a public earnings call. Indications were looking positive for the company (the FTC, the federal government’s primary antitrust actor, even filed a friend-of-the-court brief on Teladoc’s behalf), but ultimately the two sides realized they would rather reach a compromise than take the case any further up the ladder. Last fall they requested a stay in the case and a settlement seemed likely to follow.

Gorevic confirmed to MobiHealthNews that if Abbott signs the bill, it will essentially end the long legal battle.

“We expect that the legislation, if signed by the governor, will end the lawsuit,” he said. “It will obviate the need for the lawsuit.”

Coming together at the table

Legislative attempts to end the lawsuit and meet a compromise on telemedicine began back in 2015. LaToya Thomas, director of the State Policy Resource Center for the American Telemedicine Association, told MobiHealthNews that there was a strong sense that legal guidance was the only way to not only end that conflict, but to prevent similar conflicts in the future.

“Texas’s case is a unique one in which the state legislator needed to get involved not only because of what was happening with the medical board but the implication of what could happen with other boards,” she said, adding that a grassroots effort stopped the state’s counseling board from passing a similar rule.

Nora Belcher, the director of the Texas eHealth Alliance, said that early attempts to create compromise legislation were too disjointed to make it through the legislature.

“After last session, what I heard from legislative leadership was ‘Y’all get in a room and work it out’,” she said. “A bunch of the bills from last session were all aimed at resolving the Teladoc lawsuit in different ways. But because there were so many and they were so different they couldn’t get any traction.”

So Belcher, along with Teladoc, the medical board, and a number of other stakeholders including hospitals and nurse practitioners, did just that. They started meeting a full year before the legislative session to draft a single bill everyone could be happy with.

“You’ve got to tip your hat to the Texas eHealth Alliance,” Thomas said. “The folks they were able to get to the table were a multi-stakeholder group of hospitals, solo providers, and telemedicine providers. They had an insightful leader in Nora Belcher and they had someone they could trust.”

As it turned out, the providers didn’t want too much: they wanted the assurance of a robust standard of care, no changes to the licensure arrangement, and some clarifications about reimbursements, particularly that health plans wouldn’t be expected to pay for phone calls or faxes. The legislature wanted a bill that wouldn’t be a “vendor bill” — that would protect all telemedicine providers equally. The law addresses all these issues.

Gorevic thinks what ultimately led to the state and the companies being able to work together was just the changing perception of telehealth between 2010 and today.

“Frequently regulators protect the status quo in the states of change,” he said. “I think that was the case here and – as is frequently the case – the more you can demonstrate the value and put in place measures to ensure equality, the more the status quo starts to change; it starts to adapt to innovation. Having been the leader in the market we were able to be part of that. Over time people started to understand telehealth was not a novelty, but a real solution to real problems in the healthcare system and could bring tremendous value to people in Texas.”

The law even contains some novel forward-looking provisions, such as redefining store and forward technology to include cloud infrastructure. As we noted in our initial coverage however, the bill also makes Texas the 20th state to ban telemedical abortions, an aspect of the law that could well see legal challenge going forward.

Ultimately, the legislature itself wasn’t the holdup: the bill passed unanimously in both the House and the Senate. 

Other Texas telemedicine legislation

SB 1107 wasn’t the only telemedicine bill to make it through the 185th legislative session in Texas, though it was what Belcher and her team referred to as “the big bill”.

One bill, SB 1633, would allow more telepharmacy technology to be used in Texas in areas where they don’t have pharmacies. Another, HB 1697, would establish a grant program for teleNICU services for premature infants. A third, SB 922, would ensure Medicaid reimbursement for the use of telemedicine in schools.

All but SB 1633 are on their way to the governor as well, and the telepharmacy bill is currently in reconciliation between the House and Senate.

“It’s a shockingly good year for us,” Belcher said. “We had 17 bills last year and the only two that passed. Really this year if we get three of these four, these are huge not just structural wins, but symbolic wins that say ‘Let’s have these big conversations.’ It’s new, it’s different, it’s scary. We’re passed that as a state and that’s exciting.”

Telemedicine in Texas is open for business

Despite the current regulatory state of affairs, all four of the top direct-to-consumer telemedicine companies have some existing presence in Texas they’re building on. Teladoc and MDLive have been operating phone-only services, per their interpretation of the existing rule. American Well has been in Texas via its relationships with hospitals, which can currently use telemedicine for follow-up visits with no legal issues. The prescribing rule also has a longstanding mental health exception, so Doctor on Demand has been offering telemental health services in the state.

But following the passage of the bill into law, all four companies will be able to operate video visits not just in Texas, but all across the country. 

“Obviously we are the last state to completely authorize video direct-to-consumer telemedicine. That’s a big deal for the companies because they can now have a 50-state strategy,” Belcher said. 

American Well CEO Roy Schoenberg was careful to highlight American Well’s decision to stay out of Texas, despite that the company does offer phone calls.

“For us probably more so than any other company, we’ve taken the position that unless the medical board expressly embraces the way we do telehealth, we’re not open for business,” he said. “We need it to be in plain view. … unlike some of the other operators that have always found loopholes to operate in the state of Texas, believing that they won’t be prosecuted or the physicians won’t be prosecuted.”

But now that the law is passed, he sees benefits not just for American Well’s direct-to-consumer business but for their enterprise partnerships as well.

“The bottom line was since the medical board had issues with the formation of a physician-patient relationship, we didn’t operate at all. This impacted many clients of American Well including very large national insurers. Because we didn’t operate in Texas, they were kind of prevented from operating in Texas. Anthem, United, and many others deliver services over the American Well platform,” Schoenberg said. “This new bill that just came in opens the door for American Well and our whole ecosystem to deliver a variety of services there. Users who could only follow up with patients can now open up the system and harness the whole power of it.”

Doctor on Demand CEO Hill Ferguson told MobiHealthNews in an email that his company will build on its mental health business to expand into other areas of care in Texas.

“We have been able to provide mental health services through our video platform in Texas and grown our mental health practice robustly -- saving patients time and money they would have spent in traveling and in the waiting room,” Ferguson wrote. “Building on this success, we look forward to improving access and providing compassionate care to patients in Texas with the new law in place.”

Scott Decker, CEO of MDLive, told MobiHealthNews that Texas is the company’s biggest state, but he isn’t concerned about new competition flowing in now that the playing field has been leveled. 

“It’s not introducing more competitors for the [telephone] market where we’ve already established a big number of visitors. I don’t think we’re going to see all of a sudden a big percentage who are going to switch to video. What we’re really viewing this as is opening a bigger market in Texas. Thankfully we’ve established a good relationship with consumers in Texas and we see this as a net gain for us.”

What’s next?

This is a big victory, but its far from the end of the legislative road for telemedicine. ATA’s Latoya Thomas noted a number of threads her organization is following: restrictive ocular telemedicine bills in Connecticut and Rhode Island, existing prohibitions on telephone visits in Arkansas, and new rules from Iowa’s physical therapy board that could limit telehealth use for licensed physical therapists, to name a few.

“This is a good first step and a good indication to other states that if Texas can do it, other states can follow suit,” she said. “I think other states should be looking at Texas as a way to give telehealth the green light.”

“Certainly there were a lot of eyes on the Texas deliberation of telehealth,” added Teladoc CEO Gorevic. “I’m not sure it’s the proverbial domino, but I would say the vote of support voiced by the Texas legislature is certainly a significant endorsement of the value of telehealth. And the other thing that’s interesting is it coincides with the positive movement in Washington. The CHRONIC bill, for instance, or the 21st Century Cures Act which has a fair amount of positive language relative to telehealth. While none of those is final and overarching, all of them unanimously voice support for the use of telehealth in improving the healthcare system.”

Most agree that the biggest upcoming battle for telemedicine will be the battle for universal reimbursement.

“Obviously the next big legislation domino to fall is Medicare reimbursement across the country for all Medicare type visits,” Decker said. “That’s probably the next big one the industry would love to see move down the path.”

Even in states like Texas, which have parity laws on the books, it can be difficult to get reimbursed in practice. 

“Parity is a very nice wording in the lawbook, but for physicians, if you ask them ‘will I get paid if I see my patients through telehealth?’ the answer is ‘I have no idea.’” Schoenberg said. “I think the root cause of the problem is that Medicare is sitting on the fence. Hopefully that will change, but in the meantime I think everyone is looking at each other, not sure what to do.”

Until the next fight, providers, vendors, and legislators can celebrate what seems to be the rare legislative win-win, a bill it seems just about everyone is happy about.

“This is where we’ve all wanted Texas to get for some time,” Decker said. “We couldn’t be happier. It’s a landmark for a major state like Texas getting in line with where the future is. It's one less barrier to the adoption of virtual care markets.”