On telehealth and incident-to billing: MedPAC debates physician fee schedule values

Medicare could pay physicians less for telehealth patient visits because the virtual visits require fewer resources than meeting face to face.

Meanwhile, Medicare could be reformed to pay directly nurse practitioners (NPs) and physician assistants (PAs), instead of having them bill “incident to” care provided by a supervising physician.

The issues came up this month as the Medicare Payment Advisory Commission (MedPAC) discussed payment accuracy of the Medicare physician fee schedule. Issues around incident-to billing were not necessarily new — MedPAC recommended direct billing for NPs and PAs in 2019. As for telehealth, things have changed since the COVID-19 pandemic and reimbursement could be in play.

The session was informational so it did not lead to a formal recommendation by MedPAC. MedPAC Principal Policy Analyst Brian O’Donnell, M.P.P., presented the analysis, and MedPAC Chair Amol Navathe, M.D., Ph.D., led discussion.

How much less does telehealth cost?

Medicare pays the same for most telehealth and in-person office visits, but a new federal analysis found a common video visit requires 71% less in direct practice expenses.

Before the COVID-19 public health emergency, Medicare covered few telehealth services, and use was low. By now it’s well known that telehealth use boomed during the pandemic.

Use peaked in the second quarter of 2020, declined and has held steady since. In 2025, fee-for-service Medicare spent about $2.4 billion on telehealth under the physician fee schedule, and about 6.1 million beneficiaries had a telehealth visit, O’Donnell said. Academic research on telehealth’s effects on cost, use and quality is mixed, but it often finds small increases in use and spending.

Congress has since made telehealth flexibilities permanent for mental health services. For other services, lawmakers have extended them in a series of short-term patches, most recently through 2027, O’Donnell said. The latest extension also delays an in-person visit requirement through 2027.

MedPAC has said CMS should pay less for telehealth and set rates based on the cost of providing it. The American Medical Association (AMA) collected cost data for telehealth office visits, but CMS did not use them because the agency said the law requires equal payment for telehealth and in-person services, O’Donnell said.

MedPAC staff used those data to compare the most common telehealth service, an office visit billed under code 99214, in person and virtually. Direct practice expenses were $33.57 for the in-person visit, $9.72 for an audiovisual visit and $8.10 for an audio-only visit. The difference comes mostly from fewer minutes of nurse or medical assistant time.

Paying less for telehealth office visits to match those costs would have cut 2025 fee-for-service spending on the services by about 20%, or $278 million, according to the MedPAC analysis. Lower rates would still allow widespread access while limiting incentives for overuse, O’Donnell said.

Should Medicare pay less for virtual care?

Commissioner Brian Miller, M.D., M.B.A., M.P.H., called telehealth a “super high priority” for MedPAC.

“The idea that we are paying the same, regardless of the modality of service, seems sort of absurd,” Miller said.

He said a visit where the patient is in a remote clinic with an assistant may justify a similar rate. A physician working from home is different, he said.

“Me sitting in my home office, doing a telehealth visit or calling a patient, it probably doesn’t cost as much, right? And we have reasonable evidence, so we should look at that and try and model what we think that could be,” Miller said.

Other commissioners urged caution. Commissioner Scott Sarran, M.D., M.B.A., said that when the arguments are close, he would favor access.

“I would err on the side of access and not too heavy regulation, because I think this is an area where there is a lot of care innovation happening, and we don’t want to shut that down. We want to promote the ability for providers to find innovative ways of managing particularly people with chronic diseases that need lots of different touch points over time,” Sarran said.

Commissioner Robert A. Cherry, M.D., M.S., said lower telehealth payments could lead to more in-person visits, adding pressure on access to care and frustrating patients. Because the flexibilities expire at the end of 2027, Congress may again ask MedPAC for its views, so the commission should keep discussing the topic, he said.

Commissioner Danielle Pierotti, Ph.D., R.N., asked whether audio-only telehealth is really just a phone call. Billing rules separate a full office visit from a short check-in, which is paid at a lower rate, O’Donnell said. Audio-only care has fallen to roughly 10% of fee-for-service telehealth, he said. Pierotti also asked staff to separate telehealth in which a nurse or medical assistant acts as “the hands of the provider,” because its costs differ.

Does telehealth connect back to primary care?

Commissioner Stacie B. Dusetzina, Ph.D., noted that glucagon-like peptide-1 (GLP-1) drugs have been widely prescribed through telehealth. She asked whether Medicare patients can get new prescriptions that way and urged closer monitoring of telehealth.

Commissioner Gina Upchurch, R.Ph., M.P.H., asked whether outcomes differ when, for example, hypertension or diabetes is managed by phone rather than in the clinic. She also asked whether a telehealth clinician who prescribes for a patient must share that information with the patient’s primary care physician.

Medicare’s telehealth rules are specialty-agnostic, so any clinician who meets the criteria for an evaluation and management (E&M) visit can bill for it, O’Donnell said. Asked whether that clinician must communicate with the patient’s primary care physician, he said Medicare does not require that for billing an E&M service.

Who benefits from incident-to billing?

Under incident-to rules, NPs, PAs and certain other clinicians can bill under a supervising physician’s national provider identifier (NPI). Services must be furnished in a noninstitutional setting such as a physician’s office, generally under direct supervision, and not for new patients or new problems. Medicare pays 100% of the fee schedule rate for incident-to services and 85% when NPs and PAs bill directly.

Incident-to billing reached an estimated 38 million encounters in 2022, or about 39% of these clinicians’ office encounters, O’Donnell said. Surgical specialists bill a larger share of their visits incident-to than primary care physicians do, and most NPs and PAs practice in specialty care. Together, those findings suggest most of the financial benefit goes to specialty physicians, he said.

Because Medicare can’t tell who furnished the service, incident-to billing reduces transparency, impedes program integrity, raises spending and limits evaluation of NP and PA care, O’Donnell said. In 2019, MedPAC recommended that Congress require advanced practice registered nurses and PAs to bill Medicare directly. Groups representing NPs and PAs generally support that, he said. Incident-to rules have also loosened. Since 2026, CMS has allowed supervision by audiovisual technology, so an NP or PA can bill under a physician’s NPI even when the physician is at a distant location. Starting in 2027, a required modifier will flag telehealth services billed incident-to, the first time some of these services will be directly identified on fee-for-service claims.

Would direct billing change who gets hired?

Miller said the case for direct billing is already made. Incident-to billing “treats other practitioners as second class citizens,” he said.

Commissioner R. Tamara Konetzka, Ph.D., said she still supports the 2019 recommendation but wants to know why practices continue to bill incident-to where direct billing is allowed. Barriers could include legal concerns or the difference between 85% and 100% payment, she said. Dusetzina said she worries about a policy that has more clinicians being paid less for the same work, and she asked which patients are seen by practices that rely less on incident-to billing.

Upchurch asked whether losing that 15-point difference would make practices less likely to hire NPs and PAs. Supply of and demand for NPs and PAs have been robust, O’Donnell said.

“One can envision that some kind of modest kind of payment reduction could on the margins affect things, but I think there’s a whole pipeline of robust kind of supply and demand that would lead me to believe it wouldn’t be substantial, but I think that’s borderline speculative,” he said.

Direct billing would change only Medicare billing rules, not what NPs and PAs can do, O’Donnell said. State scope-of-practice laws and collaboration agreements govern that.

Is the fee schedule accurate?

CMS has taken several steps to improve fee schedule accuracy, including revaluing E&M office visits in 2021, adopting an efficiency adjustment in 2026 and shifting practice expense relative value units (RVUs) from facility to non-facility settings in 2026. These policies are budget neutral, so savings are recycled back into the fee schedule, O’Donnell said.

Miller said fee schedule rates remain “out of whack.” The RVS Update Committee is the American Medical Association panel known as the RUC that uses specialty society surveys to recommend values to CMS. Replacing the RUC with another expert panel would likely be just as inaccurate, he said.

“I think we need a dynamic and not a static system,” Miller said.

What about surgical follow-up?

The presentation included data about global surgical services and the clinical laboratory fee schedule.

Medicare spent $8.2 billion on global surgical packages in 2024. Those payments include postoperative visits, but research by RAND Corp. found only 17% of the visits Medicare pays for in 10-day packages are delivered, along with 47% in 90-day packages. Staff outlined two options: unbundle the visits or keep the bundle and lower its value. Commissioner Joshua Liao, M.D., M.Sc., Konetzka and Sarran favored keeping the bundle.

Commissioner Cheryl L. Damberg, Ph.D., raised an issue familiar to primary care. She said she has heard that surgeons are pushing patients to primary care physicians for follow-up after surgery, and that when primary care pushes back, surgeons send the patients back again. She asked staff to interview primary care physicians about that dynamic.

What about office labs?

Medicare spent about $9 billion on clinical lab fee schedule tests in 2025. Preliminary rates based on new private-payer data would cut those rates by 16% on average, though caps in 2027 limit reductions for nearly 800 tests, O’Donnell said. Reporting by physician-office labs rose 195% in the new round of data collection. Beneficiaries pay no cost sharing for these tests, though some now cost $3,000 to $5,000, O’Donnell said. Miller said high-cost tests should probably carry some cost sharing.

What comes next?

Navathe said commissioners showed particular enthusiasm for continuing work on telehealth, and that staff will keep tracking incident-to billing. MedPAC has no mandated telehealth report pending, O’Donnell said. Protections for beneficiaries treated at rural health clinics, one of the telehealth guardrails MedPAC has considered, are set for discussion at next month’s meeting.