Telehealth Payment Rules: Avoid VBC Sanctions (42 CFR § 414.65)

Value-based care arrangements change how small healthcare practices are paid, and telehealth is now a core care-delivery modality within those models. Medicare’s telehealth payment rule at 42 CFR § 414.65 establishes who may bill for telehealth services, how originating-site facility fees are paid, how deductible and coinsurance apply, and what payment limitations and sanctions exist. These rules directly affect attribution, shared-savings calculations, and compliance risk when telehealth encounters are included in value-based programs such as ACOs, MIPS, and Advanced APMs. This article explains how 42 CFR § 414.65 interacts with value-based care and outlines practical steps small practices must take to align telehealth billing, documentation, vendor governance, and monitoring.

Telehealth is no longer only an access tool; it influences attribution, quality measurement, and financial reconciliation in value-based care arrangements. While 42 CFR § 410.78 defines what qualifies as Medicare telehealth, 42 CFR § 414.65 governs payment for those services. Small practices participating in value-based arrangements must understand how telehealth claims flow into shared-savings models and how improper billing or documentation can distort attribution, reduce incentives, or expose the practice to sanctions.

Failure to align telehealth workflows with § 414.65 can result in denied claims, repayment demands, inaccurate quality scores, or compliance findings that jeopardize participation in value-based programs.

Understanding Telehealth Payment Under 42 CFR § 414.65

Professional service billing

Under 42 CFR § 414.65(a), payment for Medicare telehealth professional services described in § 410.78 is generally equal to the applicable physician fee schedule amount, subject to specific limitations:

●      Only the distant-site physician or practitioner may bill for the professional telehealth service.

●      Payment for the professional service may not be shared with a referring practitioner or telepresenter.

These limitations are especially important in value-based enterprises (VBEs), where compensation arrangements must not conflict with Medicare payment rules.

When facility fees apply

Under 42 CFR § 414.65(b), an originating-site facility fee may be paid when applicable. Key points include:

• Only the originating site may bill the facility fee.

• The distant-site practitioner may not bill for or receive facility-fee payments.

• Certain originating sites and services are excluded from facility-fee payment.

In value-based arrangements, these rules affect how costs are allocated and reconciled within shared-savings calculations.

Under 42 CFR § 414.65(c)–(d):

• Telehealth professional services and originating-site facility fees are subject to Medicare deductible and coinsurance requirements.

• Payment is made only on an assignment-related basis for physicians, practitioners, and originating sites.

Practices must ensure patient cost-sharing is applied correctly, as errors can trigger compliance findings or beneficiary complaints.

42 CFR § 414.65(e) authorizes sanctions when a practitioner or originating site:

• Knowingly bills in violation of telehealth payment limitations

• Fails to correct or refund excess charges

• Submits improper claims or imposes prohibited charges

In value-based arrangements, sanctions can extend beyond repayment and may threaten program participation or trigger broader compliance reviews.

Attribution and claims data

Telehealth claims feed attribution logic in ACOs and other value-based models. Incorrect billing (for example, wrong place of service or missing modifiers) can misattribute care, affecting performance benchmarks and shared-savings calculations.

Revenue-sharing constraints

Because § 414.65(a)(2) prohibits sharing professional telehealth payments with referring practitioners or telepresenters, value-based compensation structures must be carefully designed to avoid impermissible revenue sharing.

Quality measurement and reporting

Telehealth encounters may count toward certain electronic clinical quality measures (eCQMs) and Quality Payment Program reporting when allowed by CMS guidance. Practices must ensure telehealth data are captured in structured formats that registries and QCDRs can process.

Step-by-Step Compliance Guide for Small Practices

Step 1: Map telehealth services to value-based programs

Identify which telehealth services your practice furnishes and map them to CPT/HCPCS codes, modifiers, and place-of-service rules used in your value-based contracts.

Step 2: Standardize telehealth documentation

Ensure EHR templates capture:

• Patient location (originating site)

• Modality (audio-video vs. audio-only)

• Distant-site practitioner

• Time (when relevant)

Step 3: Align billing with § 414.65 limitations

Confirm that only distant-site practitioners bill for professional services and that no prohibited revenue sharing occurs.

Step 4: Integrate telehealth into quality reporting

Verify that telehealth encounters are correctly included in eCQMs, registries, and QPP submissions when permitted.

Step 5: Reconcile claims and shared-savings data

Monthly reconciliation of telehealth encounters, claims, and attribution lists helps detect errors early.

• Telehealth claims billed only by distant-site practitioners

• No sharing of professional payments with referring or telepresenting clinicians

• Originating-site facility fees billed only when permitted

• Deductible and coinsurance applied correctly

• Telehealth encounters captured for quality reporting where allowed

• Monthly reconciliation and documentation of corrective actions

Common Pitfalls to Avoid

• Informal revenue sharing that violates § 414.65(a)(2)

• Incorrect billing that misattributes telehealth care

• Failure to integrate telehealth encounters into quality reporting

• Lack of monitoring and reconciliation in value-based arrangements

Small practices can reduce risk by treating telehealth as a formal program element within value-based care. Clear documentation standards, billing crosswalks, vendor governance, and routine audits help ensure telehealth contributes positively to shared-savings outcomes rather than creating repayment or enforcement risk.

42 CFR § 414.65 governs how Medicare pays for telehealth services and establishes limits that directly affect value-based care participation. Small practices entering or expanding value-based arrangements must align telehealth billing, documentation, compensation structures, and quality reporting with these rules. Doing so protects shared-savings revenue, supports accurate performance measurement, and reduces compliance exposure.

A practical step to reinforce compliance is integrating a compliance system into your operations. These tools monitor requirements, perform ongoing risk reviews, and keep your practice prepared for audits, helping you avoid costly mistakes while presenting a proactive stance to oversight bodies.

• 42 CFR § 414.65 — Payment for Telehealth Services (eCFR)

• CMS Telehealth Services and Billing Guidance

• CMS Quality Payment Program and Telehealth Resources

• HHS Office for Civil Rights — Telehealth and HIPAA Guidance