Healthcare in the United States is undergoing significant changes, particularly in the areas of reimbursement and coverage of telehealth, substance use disorders (SUDs), and mental health services. The proposed 2025 Physician Fee Schedule (PFS) by the Centers for Medicare & Medicaid Services (CMS) marks a major shift in these areas, and solidifies key measures introduced during the COVID-19 pandemic. As these sectors evolve, it is crucial for providers, payers, and policy makers to adapt to these emerging trends.

The rise in telehealth usage during the COVID-19 pandemic prompted CMS to temporarily expand access and reimbursement. Now, the proposed 2025 PFS aims to make many of these measures permanent.

Key Provisions in the Proposed Rule

  1. Extension of Telehealth Flexibilities: CMS proposes extending telehealth flexibilities and, further, proposes allowing healthcare providers to continue offering services remotely without the previous geographic and site constraints that once restricted telehealth. This includes allowing practice addresses as distant site locations.
  2. Reimbursement Parity: CMS is working to ensure services are reimbursed at the same rate regardless of whether those services are provided in person or via telehealth (reimbursement parity), especially for those services provided by personnel under a physician’s supervision. Providers may need to reconsider their workforce, shifting more responsibilities to nurse practitioners or physician assistants, which could ensure that telehealth remains a financially viable option for providers, and encourage its further integration into healthcare models. Reimbursement parity ensures that telehealth is not seen as a temporary or secondary option but rather as a standard part of healthcare delivery.
  3. Behavioral Health and Telehealth: The proposed rule further underscores telehealth’s growing importance in providing access to behavioral health services. CMS proposes allowing the prescription of FDA-approved overdose reversal medications via telehealth, highlighting the importance of digital healthcare solutions in addressing the nation’s mental health and substance use crises.

These changes indicate that telehealth, once supplementary, is becoming an essential part of the healthcare system. As such, payers may need to modify their telehealth policies to align with federal guidelines and prepare for an influx of telehealth claims, particularly in behavioral health.

Impact on Healthcare Markets

The 2025 PFS could transform various aspects of healthcare markets including pricing, delivery models, and access to care:

  1. Shift Toward Value-Based Care: The PFS continues the shift from a volume-based, fee-for-service model to a model that reimburses providers based on health outcomes (i.e., value-based care), thereby encouraging providers to focus on delivering high-quality care that leads to better patient outcomes. This move may lead to increased competition based on quality rather than quantity of services. This could result in the consolidation of smaller practices if they struggle to meet new quality metrics, potentially increasing market concentration. It may also result in innovative care models using advanced data analytics and care coordination strategies to achieve better outcomes.
  2. Expansion of Telehealth Services: The PFS would keep telehealth and in-person payment amounts equal with the goal of improving access to healthcare, particularly in rural and underserved areas. This could lead to a more equitable distribution of healthcare resources and increased competition from digital health companies. Through this, in-person providers may face competition from telehealth providers, potentially shifting market share towards those who can effectively integrate telehealth into their practice, including integrating behavior healthcare with primary care.
  3. Economic Pressures on Providers: While telehealth may increase efficiency and reduce costs, maintaining reimbursement parity might exert pressure on providers to manage their costs more effectively, particularly if telehealth services become a larger share of their revenue streams.
  4. Growth of Behavioral Health Services: A focus on integrating behavioral health with primary care could expand this sector, attracting new entrants and increasing competition. Providers specializing in mental health and substance use disorders could see increased demand, prompting further integration of these services with primary care, leading to the development of more comprehensive care models that address both physical and mental health needs.
  5. Regulatory Compliance and Administrative Burden: The new PFS includes updates that may increase the administrative burden on providers, particularly regarding complex billing and documentation requirements. Smaller practices may struggle with these added burdens, potentially leading to consolidation. Providers may adopt more advanced healthcare IT systems, which could drive further innovation in healthcare technology.

State-Level Developments 

While CMS sets the tone at the federal level, anticipated changes in California, Florida, Texas, and New York are indicative of broader healthcare policy trends. Payers face expanding parity requirements related to benefits and coverage policies and adjustments to payment structures to effectively implement value-based models.

  • California: California is leading efforts to expand telehealth services, focusing on maintaining reimbursement parity and refining licensure requirements to ensure the viability of telehealth. The state is also enhancing its mental health parity laws to ensure that mental health and SUD benefits are provided at the same level as medical and surgical benefits.
  • Florida: Florida is advancing telehealth legislation to address critical gaps in care, particularly for mental health services and the treatment of substance use disorders. Florida is also promoting the adoption of value-based care models that focus on patient outcomes and cost efficiency.
  • Texas: Texas is focusing on expanding access to telehealth and mental health services while ensuring that mental health and SUD benefits are provided equally to physical health services.
  • New York: New York continues to advance legislation that expands telehealth access and is increasing the enforcement of laws to ensure parity in mental health and SUD services.

Implications for Healthcare Providers and Payers

The proposed changes represent major shifts in how healthcare services are reimbursed and covered, especially for telehealth, substance use disorders, and mental health services. For providers, these changes offer opportunities to expand services through telehealth and integrate behavioral health into their care models.

For payers, the implications are significant. The move towards reimbursement parity in telehealth, coupled with enhanced mental health parity laws, means that payers will need to adjust their reimbursement models and ensure compliance with new regulatory standards. Additionally, expanding value-based care models will require collaboration between payers and providers to ensure that these models are effectively implemented for better patient outcomes.

As the U.S. healthcare industry faces these changes in reimbursement and coverage parity, it is essential for providers and payers to stay informed. The 2025 PFS and state-level initiatives represent a critical step in the evolution toward more efficient, equitable, and patient-centered care.

The shift towards telehealth as a permanent fixture in healthcare delivery, the enhancement of mental health parity laws, and expanded value-based care models present challenges and opportunities. By staying ahead of these developments, providers and payers can ensure they are well-positioned to meet changing patient needs while maintaining compliance with new regulatory standards.