Suit Challenges Medical Board on Telemedicine

In just over a month, a new state rule is set to kick in that could undercut the business model of Dallas-based Teladoc, a rapidly growing telemedicine company that connects patients and doctors over the telephone and internet.

With the clock ticking, the company is brandishing every weapon in its arsenal, deploying teams of lobbyists and lawyers to fight a Texas Medical Board rule change that it says is more about stifling competition than protecting patient health.

The board's rule, set to start June 3, would prevent doctors from treating people over the phone — making a diagnosis or prescribing medicine — unless another medical professional was physically present to examine the patient.

Teladoc's services, used by major insurance companies and state Medicaid patients, among others, offers consultations and prescriptions without an in-person exam.

After years fighting the new rule in court, Teladoc has assembled a top-flight team of more than a dozen lobbyists hoping to persuade state lawmakers to step in and trump the medical board with new law.

If that doesn't work, Teladoc has also gone back to court, filing an antitrust lawsuit alleging that the 19-member board made up mostly of doctors is behaving like a cartel.

“We believe very strongly that the members of the Texas Medical Board are behaving in an anti-competitive manner,” said Jason Gorevic, the company’s chief executive. “It was really only when Teladoc grew to a size that became a threat to the brick-and-mortar physicians that the Texas Medical Board took action.”

Teladoc has about 2.4 million Texas members, and more than 10 million members nationally, according to a company spokeswoman, and does business in 48 states. It has grown explosively in recent years, more than doubling in 2013, and then again in 2014. The for-profit company brings in between $25 million and $100 million in revenue, according to a 2014 filing with the Securities and Exchange Commission.

The medical board, which licenses and regulates physicians, stands by the telemedicine rule, saying it protects patient safety. Doctors who work for Teladoc and similar companies rely on self-reported patient data to make their diagnoses.

“Everyone has heard of an ‘H and P’ — a history and a physical exam,” said Mari Robinson, the board’s executive director, who said she could not speak about any specific company because of pending lawsuits. “When you are solely relying on what a patient is telling you, you only have the H, the history. You don’t have the physical exam, the objective portion of the information to make a diagnosis."

So far, Teladoc appears to be having little luck swaying state lawmakers to override the medical board’s rule. One bill that would — House Bill 3444, by state Rep. Jodie Laubenberg, R-Parker — has languished in the House Public Health Committee without a hearing. It was noticeably absent from the roster of bills heard on the committee’s self-proclaimed “telemedicine day” several weeks ago.

Asked why, Laubenberg said, “The time is not right.”

“The TMB and the teledocs are going to have to iron out their differences, and I don’t want to put anyone in a rough spot,” she said.

Gorevic admitted the window of opportunity to get help from the Legislature is closing. “The time is growing short in the legislative session, and we feel that it’s our responsibility to do everything we can to protect the rights of Texans to access telehealth,” he said. “That led us to file this suit.”

The suit filed in a federal district court claims that the medical board is acting illegally to stifle competition, and asks the court to keep the rule from taking effect.

The lawsuit is not entirely unprecedented. In North Carolina, the Federal Trade Commission sued the state’s board of dental examiners, composed mostly of dentists, for taking actions that kept non-dentists from offering teeth-whitening services in the state. The U.S. Supreme Court upheld a ruling against the dental board earlier this year.

Roy Smythe, a former member of the Texas Medical Board who supports expanded telemedicine, said the board was acting out of good intentions to “protect patients from harmful practice." 

But, he said, the board’s decisions were probably influenced by the state’s powerful physician lobby. And the new rule would put Texas “at the bottom of the list for states that are effectively using telemedicine and similar approaches for care,” he said. “The crazy thing about that is Texas has some of the worst access to care in the country.”

Robinson, of the medical board, denied that Texas has more restrictive rules compared with other states, many of which have not yet made formal rules addressing telemedicine, she said. 

In any case, the market for over-the-phone services is projected to continue its breathless rate of growth. About half of large employers planned to offer telemedicine in their health coverage in 2015, up from 28 percent in 2014, according to a survey conducted last year by the consulting firm Towers Watson and the National Business Group on Health.

Meanwhile, because Teladoc partners with Aetna, a health insurance company that contracts with the state, many Texans receive Teladoc services through public programs. The Teacher Retirement System of Texas’ health plans cover Teladoc services, for example. And about 800,000 Texas Medicaid enrollees have access to Teladoc consultations, Gorevic said. The Texas Medical Board rule change could imperil those services.

“Until the rules are enacted, Aetna will continue to offer Teladoc services to our members,” Anjie Coplin, a spokeswoman for the insurance company, said in an email.

The medical board contends that its rules will not jeopardize the practice of telemedicine in the state, because most telemedicine providers already abide by them. Critics of Teladoc accuse the company of unfairly skirting the rules with skillful lawyering.

Even among trade organizations for the electronic health care industry, there is disagreement about whether Teladoc's business model should be considered true telemedicine. In a letter to the board, the Texas e-Health Alliance, an industry group, said the over-the-phone model used by Teladoc “does not meet the definition of telemedicine as our organization recognizes it.”

“There is an appropriate role for phone calls, text messages, and other forms of electronic outreach as medical support to patients,” wrote Nora Belcher, the group’s executive director. “However, should the Board choose to pursue defining that role, we believe it should be done separately from the regulation of telemedicine.”

Eva Hershaw contributed to this report. 

This story was produced in partnership with Kaiser Health News, an editorially independent program of the Henry J. Kaiser Family Foundation, a nonprofit, nonpartisan health policy research and communication organization not affiliated with Kaiser Permanente.