Kaiser says Medicare's contractor ban reaches inside its own walls

A rule that fires the middlemen

Medicare's draft 2027 physician fee schedule↗, released July 14, would pay for remote physiologic and therapeutic monitoring only when the clinical staff delivering it are direct employees of the practice that bills ¹². As of January 1, 2027, work contracted to third-party companies stops being billable; practices may still buy devices and software from vendors, but not the clinical labor that earns the fee ³. Running these programs takes devices, data integration, machine-learning analytics and monitoring teams ⁴, and most providers buy that stack rather than build it: the American Telemedicine Association estimates 60 to 70 percent of hospitals using monitoring rely partly or fully on vendor models ¹.

The money CMS is chasing

Medicare paid $15 million for these codes in 2019. By 2024 the bill was $536 million, up 31 percent in a single year, covering nearly 1 million enrollees ⁵. The HHS inspector general's 2024 review↗ found about 43 percent of monitored enrollees missed at least one of the three required components, setup and education, device supply, or treatment management ¹². Its fraud cases were uglier: unsolicited enrollment calls, monthly billing for monitoring never performed, devices never delivered ². One practice signed roughly 3,400 new monitoring patients in a single month ⁵.

The self-ban paradox

Kaiser Permanente "strongly opposes" the rule and wants it withdrawn. Its letter↗ argues the ban would restrict "clinical staff directly employed by separate business units within the same organization" from furnishing monitoring to their own patients ⁶⁷. The rule never defines "direct employee," and industry lawyers flag precisely this gray zone: staff employed by an affiliated entity that does not hold the billing number ³. Medicare wrote a rule against outside contractors, and the company that owns every layer of care says it captures Kaiser's own payroll.

The camps split along the org chart

UnitedHealth warns the requirement could "unintentionally restrict beneficiary access to high-value vendors"; CVS wants accountability standards instead of a ban ⁶⁷. Humana and the Blue Cross Blue Shield Association back CMS, writing that the change "is consistent with CMS's goals of improving program integrity" ⁶. "Plans without large employed care delivery organizations or partnerships in place can support a ban on contracted staff without major disruption," said Jared Augenstein of Manatt Health ⁶. UnitedHealth's own insurer has flipped before: last year it threatened to stop paying for most monitoring in Medicare Advantage↗ over "insufficient evidence of efficacy," then delayed after public pushback ⁶.

A Sept. 14 coalition letter↗ signed by more than 230 organizations, 35 health systems among them, says the proposal could disrupt care for roughly 1 million beneficiaries ⁷⁸.

The case for the ban, and its limits

CMS argues outsourced monitoring "can fragment care" and dilute the billing practitioner's oversight ¹⁴. Fair, as far as it goes. The inspector general flagged abuse but never recommended banning third parties outright, and the Alliance for Connected Care calls the fix "cutting off the arm to fix a broken nail" ¹.

What to watch this fall

The final rule lands this fall. CMS asked commenters how often third-party billing even occurs, a question that invites a narrower answer, and it is consulting on collapsing 17 monitoring codes into four bundled ones ²³⁴. The tell is the definition of "direct employee": keep it narrow and the vendor channel goes dark on New Year's Day; define it loosely and the paradox dissolves.