Telehealth Compliance Review: Pass the CMS Audit (42 CFR § 414.65)

Telehealth compliance reviews are becoming a standard feature of Medicare oversight. For small practices, 42 CFR § 414.65, which governs value-based care demonstrations and their overlap with telehealth, is central to ensuring proper billing and patient protections. Surveyors assess whether clinics meet requirements for service eligibility, documentation integrity, and technology standards. Small practices that proactively align their operations with § 414.65 reduce their risk of audits, payment recoupments, and corrective action plans. This guide provides practical steps, a compliance checklist, and real-world lessons to help clinic owners prepare.

Telehealth has transitioned from an emergency response tool to a permanent fixture in U.S. healthcare delivery. For small practices, this creates opportunities to expand access and improve outcomes. However, it also imposes new compliance burdens, especially under 42 CFR § 414.65, which outlines requirements for Medicare’s value-based programs and ensures telehealth integration follows federal rules. A compliance review is not a rare event, it is a predictable oversight function. Clinic owners who understand the scope of § 414.65 and embed compliance into daily operations will be better prepared to survive audits and continue serving their patients effectively.

Understanding Preparing for a Telehealth Compliance Review Under 42 CFR § 414.65

42 CFR § 414.65 governs the Medicare Shared Savings Program and related value-based models that intersect with telehealth. Under this rule, participating providers must demonstrate that telehealth encounters meet Medicare’s criteria for reimbursement, safeguard patient privacy, and align with broader quality and cost-saving goals. Surveyors test compliance by reviewing clinical documentation, billing data, and operational policies against regulatory expectations.

Key compliance points include:

• Eligibility verification: Only qualified clinicians may bill for telehealth services, and only approved codes apply.

• Technology requirements: Encounters must use an interactive telecommunications system that meets Medicare standards.

• Value-based linkage: Telehealth services must support clinical outcomes and efficiency consistent with the goals of § 414.65.

Understanding this framework allows practice owners to avoid denials, ensure revenue flow, and demonstrate a strong culture of compliance.

While CMS focuses on coverage and payment rules under § 414.65, the Office for Civil Rights (OCR) enforces HIPAA requirements tied to telehealth. A compliance review may trigger parallel scrutiny of privacy and security practices, especially if surveyors find evidence of weak safeguards. OCR investigations often stem from:

• Patient complaints alleging privacy violations during telehealth encounters.

• Self-reported breaches such as misdirected invitations, unsecured transmissions, or unauthorized access to PHI.

• Random desk audits focusing on small practices with rapid telehealth adoption.

Clinic owners must be prepared to produce BAAs, risk assessments, and evidence of workforce training to show they meet OCR standards during a compliance review.

Preparing for a compliance review requires systematic planning. The following steps help clinic owners align with § 414.65:

1. Create a Telehealth Compliance Binder. Include policies, CMS telehealth code lists, BAAs, training records, and sample documentation templates.

2. Verify clinician eligibility. Maintain a roster of distant-site practitioners with NPI and enrollment details.

3. Audit documentation templates. Ensure they include patient location, modality (video/audio-only), time/date, and clinical justification.

4. Implement coding safeguards. Use claim edits to block billing for non-approved codes.

5. Secure technology. Confirm HIPAA-compliant platforms, encryption, MFA, and audit logs are active.

6. Deliver annual training. Require all staff to complete a 45-minute telehealth compliance course.

7. Run monthly self-audits. Review 10 random telehealth encounters against § 414.65 rules and correct errors within 10 business days.

8. Document corrective actions. Keep written logs of identified issues, fixes, and staff retraining.

These steps allow small practices to show surveyors that compliance is active, not theoretical.

Case Study

A small internal medicine clinic integrated telehealth to manage chronic disease patients. During a routine CMS review, surveyors requested documentation of 25 telehealth encounters. The clinic’s EHR lacked patient location and modality details in 15 records, and billing included codes not approved under the CMS telehealth list. Additionally, no BAAs existed with the telehealth vendor.

Consequences: CMS denied payment for 40% of the reviewed claims, resulting in a $22,000 recoupment. OCR launched a parallel inquiry into the missing BAAs.

Corrective actions: The clinic created new EHR templates, executed BAAs, ran staff retraining, and implemented a monthly audit program. On re-review, surveyors found significant improvement, and OCR closed its inquiry with a corrective action plan but no fines.

This case underscores the financial and reputational risks of noncompliance and the benefits of swift corrective action.

• Billing non-approved codes. Using services not on the CMS telehealth list leads to denials and recoupments.

• Incomplete documentation. Omitting patient location, modality, or consent risks compliance failure.

• No BAAs with vendors. Lack of agreements creates HIPAA exposure.

• Weak audit trails. Failing to show corrective action undermines credibility in a review.

• Assuming value-based care flexibility negates telehealth rules. § 414.65 still requires adherence to CMS telehealth criteria.

Avoiding these errors reduces the likelihood of financial penalties and reputational damage.

• Use EHR smart phrases. Embed required telehealth fields to standardize documentation.

• Leverage free CMS/OIG resources. Fact sheets, checklists, and compliance program guidance offer no-cost support.

• Establish a denial monitoring dashboard. Track and address telehealth denial reasons monthly.

• Schedule mock audits. Use a peer or consultant to simulate a compliance review.

• Incorporate compliance into staff performance goals. Tie bonuses or recognition to zero-defect months.

These practices allow small practices to manage compliance affordably while preparing for real-world reviews.

Compliance is not just about policies, it is about daily behavior. To embed a culture of compliance:

• Assign a Telehealth Compliance Lead to coordinate updates and audits.

• Include compliance performance in staff evaluations.

• Encourage open reporting of errors without fear of retaliation.

• Use brief “compliance moments” at staff meetings to review updates.

• Keep leadership visible in compliance efforts, modeling commitment to transparency.

When compliance becomes part of organizational culture, surveyors will see consistency across documentation, billing, and staff responses.

Concluding Recommendations, Advisers, and Next Steps

Summary: Preparing for a telehealth compliance review under 42 CFR § 414.65 requires diligence in documentation, coding, technology, and staff training. Small practices that maintain a compliance binder, audit monthly, and use affordable resources are better positioned to withstand reviews without major penalties.

Advisers: Affordable solutions include EHR features for documentation prompts, clearinghouse claim edits, and low-cost compliance tracking software. Free resources from CMS, OIG, and OCR provide templates and guidance. Small practices should adopt these tools to build a lightweight but resilient compliance infrastructure that protects both revenue and reputation.

Next Steps: In the next 30 days, assemble your compliance binder and update your telehealth crosswalk. In 60 days, implement self-audits and vendor BAAs. Within 90 days, run a mock audit to ensure readiness for a real review.

• 42 CFR § 414.65 — Shared Savings Program and Telehealth

• CMS — Medicare Telehealth Services List

• OCR — HIPAA and Telehealth Guidance