Virtual-First Provider Networks: A Strategy for Plans

How does telehealth count toward Medicare Advantage adequacy?

In Medicare Advantage, telehealth does not substitute for the network; it earns a bounded credit within it. Under 42 CFR 422.116, when a plan contracts with one or more telehealth providers that furnish additional telehealth benefits in an eligible specialty, CMS grants a 10 percentage point credit toward the percentage of beneficiaries who must live within the published time-and-distance standard for that specialty and county. It is a credit against the coverage percentage, not a waiver of the standard, and it applies only to a defined list of specialty types.

That list is specific and worth memorizing, because it defines where a virtual-first posture is regulatorily rewarded. The eligible specialties for the telehealth credit include Dermatology, Psychiatry, Cardiology, Otolaryngology, Neurology, Ophthalmology, Allergy and Immunology, Nephrology, Primary Care, and Gynecology/OB-GYN. Notice what that list favors: cognitive and consultative specialties where a video visit is clinically meaningful, and where in-person supply is often thin. The specialties that require hands-on procedures, imaging, or facility-based care are not on it, which is CMS telling you where virtual care is and is not an acceptable stand-in.

The practical discipline is to treat the credit as a targeted supplement. It can close a stubborn 10-point gap in psychiatry or dermatology in an underserved county, which is exactly the kind of shortfall that otherwise drives you toward a network adequacy exception request. It cannot manufacture an adequate network out of a roster that is thin everywhere. Because how CMS measures time and distance still governs the base standard, your virtual layer is a scalpel for specific gaps, not a blanket.

What are the new telehealth reporting expectations?

The regulatory posture is shifting from tolerating telehealth to tracking it. For plan year 2026, CMS requires Medicare Advantage organizations to report whether their network providers offer telehealth services, which means telehealth availability is becoming a monitored attribute of your provider data rather than an informal convenience. That has two consequences: your network adequacy filing now has to represent telehealth capability accurately, and your directory has to keep that attribute current the same way it keeps addresses and panel status current.

This is where a virtual-first strategy quietly becomes a data-operations problem. If you are going to claim telehealth capability and, where eligible, take the credit, you have to be able to prove which contracted providers actually deliver it, in which specialties, and under what licensure. That is a provider-data discipline, and it fails the same way directories fail when it is treated as an afterthought. Building the reporting capability into your roster from the start is far cheaper than retrofitting it under audit pressure.

How does telehealth count in Medicaid managed care?

Medicaid draws the line even more tightly, and the distinction is strategically important. The 2024 Medicaid and CHIP Managed Care Access Rule, effective July 9, 2024, introduced appointment wait-time standards for the first time and required states to use an independent entity to run annual secret-shopper surveys validating both wait times and directory accuracy, against a 90 percent compliance expectation. Telehealth lives inside those surveys under a specific rule.

The rule is that appointments offered through telehealth must be identified separately from in-person appointments in the survey results, and may count toward compliance only if the provider being surveyed also offers in-person appointments to the plan's enrollees. In other words, Medicaid will credit a telehealth appointment only when it sits on top of a real in-person option, not when it replaces one. A purely virtual provider with no in-person availability does not help you clear the wait-time standard. That single sentence should shape every virtual-first design decision you make in Medicaid.

Because the two programs treat virtual care differently, a plan operating in both has to design to the stricter rule where its networks overlap and remember which credit applies where. This is one of the concrete places where the Medicaid versus Medicare Advantage network differences stop being academic and start driving distinct build strategies, and where the incoming wait-time regime detailed in our Medicaid Access Rule analysis raises the stakes on getting it right.

Designing a hybrid access model that holds up

The defensible pattern is a deliberate three-layer network rather than a binary choice. The first layer is the in-person backbone that carries the base time-and-distance and wait-time standards, because that is what the regulations actually measure. The second layer is a targeted virtual overlay in the credit-eligible and clinically appropriate specialties, used to extend reach, cut wait times, and close specific geographic gaps. The third layer is the routing and member-experience logic that makes virtual the easy first option without stranding members who need to be seen in person.

The design mistake to avoid is letting virtual capacity mask a genuine shortage. If a county is short on in-person psychiatry, a telehealth panel can legitimately improve access and earn the credit, but you still owe members a path to in-person care when the clinical situation requires it, and you still have to satisfy the base standard the credit only supplements. Virtual-first should read as 'virtual by default where appropriate,' never as 'virtual only because we could not build.'

• In-person backbone sized to carry base time-and-distance and appointment wait-time standards
• Targeted virtual overlay in credit-eligible, clinically appropriate specialties
• Clear clinical escalation paths from virtual to in-person when acuity requires it
• Directory and roster data that flag telehealth capability accurately by provider and specialty
• Member routing that defaults to virtual without stranding those who need to be seen

Credentialing and licensure across state lines

Virtual-first multiplies your licensure surface area, and that is where many strategies quietly break. The governing rule is that telemedicine is regulated by the state where the patient is located, not where the clinician sits, so a provider serving your members across three states generally needs to be appropriately licensed in all three. The Interstate Medical Licensure Compact eases the burden, but it is an expedited pathway to multiple separate state licenses, not a single national license; as of 2025 it covers 39 states plus the District of Columbia and Guam, which means it does not cover everyone or everywhere.

For network operators this has direct consequences. A telehealth provider only helps your adequacy in a given county if they are licensed to treat patients located there, and your credentialing files have to verify licensure for every state of practice, not just the provider's home state. That expands the verification workload precisely as NCQA has shortened its verification windows and tightened monitoring, which makes the credentialing clock even less forgiving for virtual panels than for local ones.

The strategic takeaway is to treat multi-state licensure as a gating input to your virtual network design, not a paperwork detail to resolve later. Map the states your telehealth partners are licensed in against the counties where you actually have gaps, and size the credentialing effort before you commit the network to a filing. When licensure and geography line up, virtual care is powerful; when they do not, a telehealth roster is a directory of providers who cannot legally help your members.

Where virtual-first strengthens the network

Used within its limits, a virtual-first strategy delivers real, defensible advantages. It shines in behavioral health, where in-person supply is chronically short and where the modality is clinically well suited, which is why psychiatry sits on the CMS credit list and why virtual care is central to modern behavioral health adequacy. It extends specialist reach into rural and underserved counties where recruiting a resident specialist is simply not feasible, complementing the tactics in a disciplined rural provider playbook. And it compresses appointment wait times, which now carry hard standards in Medicaid and growing scrutiny in Medicare Advantage.

It also improves the member experience in ways that matter for retention and quality measures. Shorter waits, easier follow-ups, and lower travel burden all show up in access-related member feedback. For plans focused on stars and quality, a well-run virtual layer is a cost-effective way to lift the access measures without the multi-year lead time of physical network build.

Where virtual-first cannot replace in-person adequacy

The boundaries are just as important to name, because overreach is how virtual-first strategies fail an audit. Telehealth cannot satisfy the base time-and-distance standard on its own; the MA credit is capped at 10 percentage points and confined to specific specialties, and Medicaid credits a virtual appointment only when in-person availability also exists. It cannot deliver procedures, imaging, hands-on diagnostics, emergency care, or the facility-based services that a network exists to guarantee. And it cannot resolve a genuine supply shortage in the specialties the credit list excludes.

There is also an equity dimension you cannot design around with technology alone. A virtual-first strategy assumes members have the connectivity, devices, and comfort to use it, and in the very populations where access is thinnest, those assumptions often fail. A defensible strategy therefore keeps an in-person option genuinely available, treats virtual as an expansion of access rather than a rationing of it, and never lets a favorable adequacy calculation obscure whether members can actually get seen.

Building the strategy with a guide

Virtual-first is neither hype nor magic; it is a precise instrument with rules that reward discipline and punish overclaiming. The plans that use it well build the in-person backbone first, apply the telehealth credit surgically where CMS and their clinical model both allow it, respect the tighter Medicaid conditions, and treat multi-state licensure and telehealth data as gating inputs rather than afterthoughts. Done that way, virtual care closes real gaps and improves real access. Done carelessly, it produces a filing that looks adequate and a network that is not.

That is the line KSM helps plans, D-SNP entrants, and risk-bearing organizations walk. We map where the telehealth credit actually earns you room, design the hybrid layers so the base standards still hold, and pressure-test the licensure and data foundation before it reaches a regulator. If you are weighing how far a virtual-first posture can take your network, explore our services or talk to our team about a strategy session grounded in your specific markets and gaps.