How to Launch a Telemedicine Practice or Telehealth Startup

Launching a telehealth platform can implicate a variety of state and federal laws, including state prohibitions on the corporate practice of medicine and fee-splitting, kickback and self-referral prohibitions, patient choice laws, and professional board regulations governing the practice of a licensed profession. 

Frier Levitt has compiled the following checklist to be evaluated prior to the launch of a telehealth business. Each business arrangement presents its own challenges and must be evaluated according to the facts at issue in that model. Accordingly, this list is not exhaustive. Instead, it includes the most common issues that exist across most telehealth models. 

From national direct-to-consumer telehealth companies focused on areas such as men’s health and behavioral health, to individual practitioners seeking to render care to their existing patients on a regional basis, Frier Levitt has developed, reviewed, and restructured a wide array of telehealth business models. 

Understanding The Laws In Your State

Corporate Structure

Will the telehealth startup operate in states that adhere to the corporate practice of medicine doctrine?

  • Additional Background Information: In many states, the corporate practice of medicine doctrine prohibits non-licensees from hiring or otherwise engaging a licensed professional to render care.
  • Practical Implications: Depending on the state(s) of interest, a telehealth startup or investor may need to adjust their business model, such as by forming or investing in a management services organization

Will professional entities be formed to render care via telehealth? If so, are the entities formed or otherwise registered to conduct business in every state in which patients will be treated?

  • Additional Background Information: As a general matter, the law that will apply to a telehealth encounter is the law of the state in which a patient is located. However, nearly all states have detailed requirements setting forth what type of corporate entities can render medical care, and whether foreign (that is, out of state) professional entities can register to do business within the state.
  • Practical Implications: A telehealth startup that operates in multiple states may need a combination of professional entities in order to operate across all states of interest. For example, a professional corporation formed in one state may register to do business in certain other states, but a separate entity may be required in additional jurisdictions. 

Financial Relationships

Issues to Consider:

  • Do the financial relationships between all parties in the model comply with kickback or patient brokering prohibitions? 
  • Will insurance be involved in the model, and if so, what further requirements are imposed upon the model? 
  • Will the telehealth platform be marketed to patients in a compliant manner?

Additional Background Information: Federal and state laws broadly prohibit the payment of kickbacks or patient referral fees in the healthcare industry, and in some states these laws may even apply to cash-based telehealth models. As such, all financial relationships among the patients in the telehealth model must be appropriately structured to comply with these laws. In addition, state fee-splitting prohibitions must also be reviewed to ensure that certain licensed professionals are not impermissibly splitting their fees with non-licensees. 

Steps To Take and Issues to Consider In Order To Start Offering Telemedicine Services

Licensing and Scope of Practice Limitations

  • Issues to Consider:
    • What type(s) of medical providers will render care via telehealth? 
    • Are all professionals licensed or otherwise authorized to practice in the state(s) in which patients will be treated?
    • Are all mid-level practitioners, including nurse practitioners or physician assistants, practicing within their respective scopes of practice?

Additional Background Information: Whether a nurse practitioner or physician assistant can engage in a telehealth encounter is a state-specific inquiry. Some states are colloquially considered “independent practice” states. In other states, nurse practitioners and/or physician assistants may need documented supervision by a physician. Additionally, some states require that nurse practitioners or physician assistants fulfill special requirements prior to obtaining prescriptive authority.  

Telehealth Laws 

  • Issues to Consider: 
    • What are the telehealth encounter requirements in the state(s) in which the telehealth model will operate? 
    • What are the modality requirements? 
    • If asynchronous encounters are permitted, are there limitations or other risks associated with such encounters?
    • Does the state maintain any prescribing limitations related to telehealth? 

Additional Background Information: Most states maintain unique laws governing the requirements for a telehealth encounter from a professional practice perspective. Moreover, federal and state funded healthcare programs, including Medicare and Medicaid, often impose heightened requirements for billing purposes above and beyond that which is required pursuant to state professional licensing or telehealth standards. 

Telehealth Concerns Related to Pharmacists and Pharmacies:

  • Issues to Consider:
    • What obligations does the pharmacist have to verify the validity of the prescription order if (s)he knows it resulted from a telehealth encounter? 
    • Who collects payment from the patient for the pharmacy product? 
    • Was the physician encounter billed to a payor if the prescription drug claim will be submitted to a PBM? 
    • In the event of an audit by a PBM, what documentation does the pharmacy collect to validate that the telehealth prescription resulted from a valid practitioner-patient relationship?

Additional Background Information: Any pharmacy that receives prescription orders resulting from telehealth may have a duty to validate the encounter conducted by the virtual prescriber. In the absence of an appropriate telehealth encounter that establishes a bona fide provider-patient relationship, any resulting prescription order is likely to be seen as invalid. Therefore, the lack of a properly formed provider-patient relationship may have a direct impact on a pharmacy. Although a pharmacy cannot interfere with or control the physician-patient relationship, state laws typically set forth varying degrees of duty placed upon pharmacists to confirm the validity of a prescription prior to dispensing; the existence of a bona fide provider-patient relationship is a critical component of that validity. For more information regarding pharmacy-specific considerations in telehealth, see our article in Total Pharmacy: Key Legal Concerns for Pharmacies Participating in Telehealth.

Controlled Substance Prescribing

  • Issues to Consider:
    • Will controlled substance prescriptions be issued through the platform? 
    • What are the DEA rules concerning the prescribing of controlled substances via telehealth? 
    • Are there any state-level controlled substance registrations that must be obtained?
    • Beyond any state-specific telehealth encounter requirements, does the state impose any restrictions on controlled substance prescribing via telehealth within the state’s controlled substances act?

Additional Background Information: In addition to the Federal Controlled Substances Act, which is enforced by the DEA, certain states further restrict or otherwise impose unique requirements upon practitioners who prescribe controlled substances. For example, some states require prescribers to obtain a state-level controlled substances registration, whereas other states may impose heightened prescribing requirements for particular drugs such as opioids or testosterone. 

Data Privacy

  • Issues to Consider:
    • Are patients provided with appropriate consents, and a Notice of Privacy Practices?
    • With respect to telehealth platforms that are operating as management services organizations:
  • Does the telehealth platform adopt terms and conditions that accurately describe the services being rendered and the platform’s role in the model?
  • Do the terms and conditions sufficiently protect the interests of the telehealth platform?
  • Is an EHR being offered by the telehealth platform to each affiliated practice or provider? If so, does the arrangement comply with HIPAA and does the telehealth platform fulfill its obligations as a Business Associate to each practice or provider?
  • How is data handled and protected? 
    • Has the telehealth company adopted a HIPAA compliance plan? 
    • Are Business Associate Agreements in place with all vendors?
    • Does the telehealth platform desire to use or commercialize data? Is there a permissible method by which this can be accomplished?
    • At what point does consumer data become patient data governed by HIPAA? 

Additional Background Information: The Health Insurance Portability and Accountability Act (“HIPAA”) and its associated rules create a complex web of regulations that virtually all health care providers must be aware of and comply with. Depending on the telehealth model adopted, HIPAA may be directly applicable to the telehealth platform, or otherwise applicable to the platform in its role as a business associate of affiliated medical providers. Finally, in addition to HIPAA, the telehealth platform and affiliated medical providers may be subject to a variety of other data privacy or data breach notification laws.

Contacting An Experienced Telemedicine Attorney

Frier Levitt helps healthcare providers, startup founders, and other entrepreneurs tackle the regulatory pitfalls present in complex telemedicine or telehealth ventures. Contact us today to discuss your concerns related to telehealth, or your ideas for a new venture.

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(973) 618-1660