Seeking Invalidation
By Joey Berlin Texas Medicine April 2016

Telemedicine Company's Suit Claims TMB Rules Are Not Immune From Antitrust Challenge

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Law Feature — April 2016

Tex Med. 2016;112(4):51-57.

By Joey Berlin

It began, more or less, as simply a case of whether a telemedicine provider could provide telephone-only patient consultations before issuing prescriptions. Now it's potentially bigger: "A huge sort of medical issue that's masquerading as a legal issue," Chicago attorney Jack Bierig says.

Teladoc, Inc. v. Texas Medical Board (TMB) now sits in the U.S. Court of Appeals for the Fifth Circuit hinging on an antitrust matter that carries implications ready to ripple well beyond what constitutes proper telemedicine practice. The issue: whether TMB, as a board made up of a majority of physicians, has the state supervision necessary to make the board immune to antitrust actions.

Since filing suit in April 2015 over rules TMB adopted earlier that month, Teladoc has argued the board doesn't have active state supervision. A U.S. district court agreed. If the courts ultimately invalidate the rules at issue based on TMB not receiving proper supervision, it will raise questions about the medical board's rulemaking authority, the vulnerability of other licensing board rules to antitrust challenges, and the future of the board's oversight.

TMB has appealed the latest court decision: U.S. district Judge Robert L. Pitman's denial last December of the board's attempt to get Teladoc's suit dismissed.

If the courts determine TMB doesn't have active state supervision, "I think you're going to see a flurry of legislative activity trying to set up some kind of mechanism whereby there will be active state supervision, such that … TMB will not be subject to the antitrust laws," Mr. Bierig, an attorney for the Federation of State Medical Boards, said at the Texas Medical Association 2016 Winter Conference Dawn Duster presentation in January.

"That decision, of course, will be of great interest and very important not only to Teladoc, and not only to the Texas Medical Board, but also to the citizens of this state and ultimately the people across the country," he said.

The Challenge

A nationwide company, Teladoc offers patients the choice of consulting with a physician by video or phone, according to its website. Patients can talk to a physician for as long as they need, according to the website's "How Does it Work?" page, and "if medically necessary, a prescription will be sent to the pharmacy of your choice."

Court documents in the case note Teladoc customers register either by phone or online and create a personal account that includes their medical history. They also have the option of uploading medical records. Once a customer schedules an appointment, the Teladoc physician consults the history and any records available before that appointment.

"What they're treating remotely, they're treating only … within the existing standard of care," said Leah Brannon, an attorney representing Teladoc. "They're not pushing the envelope on what can be treated remotely."

Since 2010, TMB rules have defined telemedicine as using "advanced telecommunications technology that allows the distant site provider to see and hear the patient in real time." The rules say telemedicine providers first have to conduct a physical examination of a patient to establish a proper patient-physician relationship. 

According to court documents, TMB sent a letter to Teladoc in June 2011 telling the company the rules required a face-to-face examination of a patient before prescribing a dangerous drug or controlled substance. Teladoc sued TMB, alleging the letter was an invalid attempt at rulemaking. Three years later, a state appeals court found TMB's letter was equivalent to invalid "amendments to the existing text" of the rule. That decision is now on appeal to the Texas Supreme Court. On Jan. 16, 2015, TMB issued an emergency rule that mandated a "face-to-face visit or in-person evaluation" before writing any drug prescription. That can be done via an in-person physical examination or via telemedicine if the patient is at a location that allows a physician to adequately examine and communicate with the patient in real time with the assistance of technology and a patient site presenter. (See "Medical Board Wages War Over Telephone Treatment," April 2015 Texas Medicine, pages 45–48.)

Teladoc obtained a temporary injunction of the emergency rule. TMB then voted to adopt a new, permanent rule in April 2015 outlawing prescription of dangerous drugs or controlled substances without a face-to-face or in-person visit. 

"According to the TMB, that new rule would require a face-to-face visit before a physician can issue a prescription to a patient, regardless of medical necessity," Judge Pitman's order says.

Teladoc quickly filed suit again, arguing TMB had committed a violation of antitrust law, and obtained another injunction. TMB staff said TMB Executive Director Mari Robinson couldn't comment on pending litigation.

The legislature's House Public Health Committee is examining telemedicine as one of its interim charges this year. This includes a look at opportunities to "expand and improve the delivery of health care and identify methods to increase awareness by provider groups, including institutions of higher education, and payers of telemedicine activities being reimbursed in Texas."

In testimony before the House committee in February, Adam Vandervoort, Teladoc's chief legal counsel, said the company doesn't use video in Texas because TMB's rules require a patient site presenter.

Mr. Vandervoort said Teladoc uses video in every state but Arkansas and Texas. He told the committee Teladoc physicians don't prescribe anything "with a street value," such as pain medication. Teladoc handled 168,893 remote visits in Texas during 2015, Mr. Vandervoort said in his testimony.

"The question isn't who should regulate the practice of medicine," Mr. Vandervoort told Texas Medicine. "Everyone agrees it's the medical board. The question is whether any professional board should be able to restrain competition for no reason. It is overwhelmingly in the public interest to have antitrust scrutiny apply to these boards."

Of TMB's 19 board members, 12 are physicians, according to the board member biographies. Because of that, Teladoc argues, TMB must have active state supervision to avoid antitrust liability — a point the U.S. Supreme Court drove home in 2015 when it ruled in favor of the Federal Trade Commission (FTC) in its case against the North Carolina State Board of Dental Examiners (NCSBDE). (See "White Teeth and the FTC.")

After the decision in that case, FTC staff released a document providing guidance on active supervision of such regulatory boards. FTC explained a "controlling number" of decisionmaking market participants doesn't have to mean a majority. For example, the FTC wrote, if a state board of electricians had four non-electrician members and three electricians, and new regulations require five votes of approval, the electricians "effectively have veto power over the board's regulatory authority."

TMB, in claiming it was immune from antitrust action, argued it has active state supervision through judicial review and legislative oversight, including sunset review and its requirement to notify the legislature of its proposed rules. In his latest order, Judge Pitman rejected those arguments and said TMB had failed to show it met the active-supervision requirement. On the legislative oversight argument, he noted the Sunset Advisory Commission "does not have the power to veto or modify any rule adopted by the TMB," and legislative committees have no authority to do so. 

The Implications

If the courts hold their current trajectory on the antitrust issue and Teladoc wins, Mr. Bierig says he anticipates the legislature will look at how to give TMB active state supervision going forward. But what about the regulations the medical board has already had in place? If the courts find there was no active state supervision when TMB adopted the April 2015 rules, could similar suits follow that challenge other existing rules?

"It's a possibility," Mr. Bierig said. "But remember: Even if there's no active state supervision, the medical board should still win as long as there's no serious anticompetitive effect. One would have to look at specific rules to determine, even assuming that they're subject to the antitrust laws, whether they really have significant anticompetitive effect.

"It's possible someone could come out of the woodwork. But the fact that others haven't done so gives cause for some hope that other regulations of the medical board will not be challenged," he said.

Julian Rivera, an Austin health care attorney, agrees the decision thus far in the Teladoc case has been specific to the rules at issue, "so it would be reasonable for all stakeholders to evaluate other medical board rules important to each stakeholder to determine whether those rules would suffer from a similar attack."

"If Teladoc prevails on the state immunity issue, then the integrity and viability of the medical board's rules on telemedicine are going to continue to be questioned, and providers will need to be particularly vigilant in deciding whether their telehealth practices are compliant," Mr. Rivera said.

The facts and legal conclusions that emerge from the Teladoc case will have great implications for the Sunset Advisory Commission's review of TMB for the 2017 legislative session, he says.

If later court decisions do find TMB has active state supervision and the board wins on the antitrust issue, Mr. Bierig says the state still may need to look at making adjustments.

"Mere exposure to suit presents a problem," he said. "It costs money, it breeds uncertainty, and probably worst of all, it may cause a medical board to pull its punches to avoid getting sued. Even if you win, the mere fact that you're subject to suit is problematic. And therefore, it's probably a good idea to explore ways in which you would minimize the likelihood of suit."

Telemedicine Physicians Weigh In

The arguments over the medical board's level of supervision wouldn't have arisen without the fight over the board's rule on "face-to-face" visits prior to prescribing. Teladoc claims in court documents that it "cannot provide telehealth in Texas if it must conduct an in-person physical exam before treating patients, and losing the ability to provide services in Texas will harm Teladoc's business nationwide. On the other side of the ledger, the rules are not necessary to promote patient safety, which is already protected by existing rules and the standard of care."

"The rule reduces the output of health care in the state, raises prices, [and] takes away a low-priced choice from consumers," Ms. Brannon said. "Our focus is not on the authority of the board to adopt the rule, but instead on the antitrust consequences of a group of active members of a licensed profession agreeing among themselves to adopt a restraint of trade."

Texas telemedicine physicians not affiliated with Teladoc say TMB's rule is a reasonable one, and Thomas Kim, MD, says it actually didn't introduce anything new.

Dr. Kim, an Austin-based telemedicine psychiatrist and internal medicine physician, says the flap over TMB's rule adoption requiring a "face-to-face visit or in-person evaluation" is a case of misunderstanding and unclear terminology in the rule. TMB put forth the emergency rule in early 2015, he says, as a way of reminding and reinforcing the regulations that were already in place for telehealth encounters, a contention Teladoc's counsel disputes.

"In order for a telehealth provider to do what they do, it typically requires a multichannel communications solution, meaning you can't just use email or the telephone or even video alone," Dr. Kim said. "You would need video and audio as a way to reasonably approximate what it would be like to do an in-person encounter.

"Now in the TMB's efforts, they chose to distinguish telehealth from conventional care by using 'face-to-face' and 'in-person,' respectively," Dr. Kim said. "Unfortunately, most people hear 'face-to-face,' and they think 'in-person.'"

TMB's telemedicine rules define an in-person evaluation as one in which the practitioner is at the same physical location as the patient. A face-to-face visit, the rules say, can be either in-person or at an "established medical site."

"Which is to say they're totally fine with it," Dr. Kim said. "What they sort of highlighted, and the question that they raised was, could a single-channel communication, in this case, [the] telephone … be adequate in order to establish a physician-patient relationship, to establish a therapeutic bond? As a general rule, everyone in the telehealth field says no.

"It would be the equivalent of going into a clinic, sitting in the exam room, having the doctor walk up to the door, knock on the door, speak to you through the door [to] have an encounter. Most people would say that's probably not enough."

Sidney Ontai, MD, of Plainview, a telehealth family physician and a member of TMA's Ad Hoc Committee on Health Information Technology, says the face-to-face rule is "reasonable in terms of establishing identity and making sure that you are who you are."

"Creating a system that facilitates patients getting antibiotics for their colds from their iPhone may not improve health," Dr. Ontai said. "There's the perception of convenience, cost-effectiveness, and improved patient satisfaction, but in terms of public health outcomes" he says it would cause concern.

"The underlying problem with this purely consumer focus on medicine is, and I know this sounds paternalistic, but in reality, sometimes some patients may focus on an intervention they think they need that, in fact, they don't," Dr. Ontai said. "A provider with whom they have no ongoing relationship will be less likely to spend the time and effort reeducating them. Even if the provider knows full well, for example, that antibiotics are not indicated for viral upper respiratory infection, it results in higher patient satisfaction to just give the patient what they want."

Mr. Vandervoort says Teladoc physicians "only diagnose and treat remotely where doing so is consistent with what doctors have been doing since the invention of telephones. Outside of that, our doctors instruct our members to go get seen in person."

Dr. Kim testified on TMA's behalf at the House Public Health Committee meeting in February. He said TMA supports an interstate licensure compact for telemedicine practitioners.

"For those that do support telehealth as a career, a supportive licensure pathway is key to realizing the maximum benefit from the specialized provider pool to address the growing clinical needs here in Texas and elsewhere," he testified.

Quality vs. Competition

Mr. Bierig says unlike the North Carolina teeth-whitening case, in which there was little defense for the dental board's actions from a competitive standpoint, the Teladoc case decision could reasonably go either way.

On one hand, he said, allowing telemedicine physicians to prescribe based on a telephone visit makes the drugs more accessible; on the other, it's also reasonable for TMB to mandate a face-to-face visit because of concerns about misdiagnosis, overprescribing, and drug diversion.

"Who should decide that question?" Mr. Bierig said. "Should it be decided by the regulatory body set up by the state, composed of physicians who really understand the medical issues? Or should it be decided by federal trade commissioners or federal judges who don’t fully understand the medical implications of prescription of antibiotics and controlled substances without a physical examination, and who focus more on competition than on patient health and safety?

"My view … is that when you have that situation, the right result is to have the state medical board — as long as it made a reasonable decision, as long as it can show that it took into account the various considerations … be the entity that decides this case, not the federal courts and not the Federal Trade Commission."

The problem the courts must address, he added, is, "when you have agencies like the medical board that are supposed to be issuing rules that are improving quality of care, you don't want to have those rules measured against antitrust laws whose sole focus is competition."

Mr. Vandervoort disagrees. "The medical board, made up of physicians, is not a disinterested party when it acts to protect its turf," he said. "Neither the courts nor the FTC will wind up second-guessing decisions that have to do with delivering safe care."

 Dr. Kim says he's confident TMB and Teladoc will work out the dispute. He says he met with Teladoc officials when he visited the Capitol to testify before the House Public Health Committee in February.

"All of the people I met were reasonable," he said. "They want this resolved. They certainly don't want the effort, the negative attention, and money being spent on this, nor do I believe the TMB [does]. I think it's possible to walk this thing back because I think everybody has the shared goal of caring for Texans the best way we can."

Joey Berlin can be reached by phone at (800) 880-1300, ext. 1393, or (512) 370-1393; by fax at (512) 370-1629; or by email.


White Teeth and the FTC

Heavily influencing the Teladoc Inc. v. Texas Medical Board (TMB) case is a 2015 U.S. Supreme Court decision in which the Federal Trade Commission (FTC) prevailed over the North Carolina State Board of Dental Examiners (NCSBDE).

The dental board, of which practicing dentists make up the majority, received complaints from dentists that non-dentists were offering teeth-whitening services at lower prices than dental professionals, according to the Supreme Court's decision. NCSBDE issued cease-and-desist letters to non-dentist providers and product manufacturers of those services. 

The FTC filed an administrative complaint alleging the dental board had engaged in an anticompetitive act. The dental board attempted to invoke immunity from antitrust action, but the FTC claimed NCSBDE didn't have the active state supervision required to invoke that immunity. Licensees of NCSBDE elect the board members, in contrast to TMB, whose members are appointed by the governor.

After the case reached Washington, D.C., the nation's highest court sided with the FTC, deciding the dental board couldn't invoke state-action antitrust immunity unless it had active state supervision, which it didn't have. The dental board required active state supervision, Justice Anthony Kennedy wrote, because it contained a controlling number of "active market participants" in the dentistry profession.


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Last Updated On

July 28, 2016

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Joey Berlin

Associate Editor

(512) 370-1393

Joey Berlin is associate editor of Texas Medicine. His previous work includes stints as a reporter and editor for various newspapers and publishing companies, and he’s covered everything from hard news to sports to workers’ compensation. Joey grew up in the Kansas City area and attended the University of Kansas. He lives in Austin.

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