Telemedicine tax implications remain unclear

Telemedicine

As telemedicine use increases in the healthcare industry, there’s something that remains unclear: The service’s tax implications.

The Internal Revenue Service has not yet made a decision on how it will tax telemedicine. That, according to Sandra Feinsmith, a tax managing director, and Laura Kalick, a national nonprofit tax consulting director with BDO USA, could lead to providers being exposed to possible audit and accounting risks.

Feinsmith and Kalick, in a post at Becker’s Health IT and CIO Review, say that currently, tax-exempt healthcare entities using telemedicine follow IRS rules under unrelated business income (UBI).

However, these rules don’t always fit with the practice of telehealth--mostly because of the definition of patient.

A patient is someone who gets treated physically in the hospital or in-person by a physician: neither apply for telemedicine.

Providers must be sure to show that a patient receiving care remotely is a patient of the hospital or that the service is “related to the hospital’s healthcare mission,” according to the authors. To show this, hospitals must have detailed medical records, show how the service serves community needs, documents patient-physician interaction or have written treatment consent.

They add that another issue is a lack of state-level tax guidance.

“From most states' perspective, if any of the telemedicine activity generates UBI and crosses state lines, the income may require apportionment among the states based on activity in the respective states and the hospital may have to file a tax return in that state,” they write.

Feinsmith and Kalick call current criteria for UBI dated, and say that the IRS and states should "reexamine the definitions of a patient, as well as the definition of providing healthcare services.”

Telemedicine has other uphill battles to climb, as well, including issues with reimbursement and fragmentation of state policies.